FOMC Minutes Show Deep Divide Behind December 2025 Rate Cut

Source: CryptoTale Original Title: FOMC Minutes Show Deep Divide Behind December 2025 Rate Cut Original Link: https://cryptotale.org/fomc-minutes-show-deep-divide-behind-december-2025-rate-cut/ The Federal Reserve released minutes on Tuesday from its December 9–10, 2025 meeting, revealing sharp internal divisions. The Federal Open Market Committee narrowly agreed to cut interest rates, citing labor market risks while tracking inflation pressures. According to the Federal Reserve, officials debated timing, scale and risks before approving the decision through a closely contested vote.

Rate Cut Decision and Policy Disagreements

The minutes show the FOMC approved a quarter-point rate cut by a 9–3 vote. Notably, this marked the most dissenting votes since 2019. The decision lowered the federal funds rate to a target range of 3.5% to 3.75%.

According to the minutes, officials weighed labor market support against inflation concerns. Several participants described the decision as finely balanced. A few supporters said they could have accepted leaving rates unchanged.

Most participants agreed further rate cuts could occur if inflation continued easing. However, they disagreed on timing and pace. Some favored holding rates steady for a period following the December reduction.

The minutes state that officials expect economic growth to continue at a moderate pace. However, they flagged downside risks to employment. At the same time, they identified upside risks to inflation.

This tension drove the unusually close vote. Despite a six-vote margin, officials acknowledged the outcome could have shifted. Therefore, the discussion reflected uncertainty rather than consensus.

Following the release, U.S. stocks traded slightly lower. Meanwhile, traders modestly increased expectations for another rate cut in April. Market pricing reflected cautious optimism rather than conviction.

Economic Projections and Inflation Risks

Alongside the vote, the Fed released its quarterly Summary of Economic Projections. Notably, the update included the closely watched dot plot. Nineteen officials submitted rate expectations, although only twelve held voting rights.

The projections suggest one additional rate cut in 2026 and another in 2027. If realized, the federal funds rate would approach 3%. Officials consider that level neutral for economic growth.

However, some policymakers raised concerns about stalled inflation progress during 2025. They argued inflation remains above the Fed’s 2% target. As a result, they sought stronger evidence of sustained disinflation.

Officials also discussed the impact of tariffs. The minutes show that most members agreed tariffs pushed inflation higher. Still, they generally believed the impact would be temporary and ease as 2026 approaches.

Recent economic data helped shape that view. Hiring remains slow, yet layoffs have not accelerated. Meanwhile, inflation has eased gradually, though it remains elevated. Economic growth data also entered the debate. Gross domestic product grew at a 4.3% annualized pace during the third quarter.

That figure exceeded estimates and improved on the prior quarter. However, officials cautioned about data reliability. Several reports lag due to the government shutdown. Even current data carried gaps, prompting careful interpretation.

Committee Changes and Return to Bond Purchases

Beyond rates, the minutes detail a significant operational decision. The FOMC voted to resume short-term Treasury bill purchases. The move aims to reduce pressure in short-term funding markets.

Under the program, the Fed will buy about $40 billion in Treasury bills monthly. Officials plan to maintain that pace for several months before scaling back. According to the minutes, the goal involves preserving ample banking system reserves.

The Fed previously reduced its balance sheet by roughly $2.3 trillion. Current holdings stand near $6.6 trillion. Officials warned that without renewed purchases, reserves could fall below desired levels.

The minutes also note upcoming committee changes. Four regional presidents will rotate into voting roles. Each incoming voter previously expressed caution toward rate cuts, suggesting a potentially more hawkish composition ahead.

The December minutes outline a divided committee navigating uncertain data, shifting leadership, and complex policy choices. They document a close rate decision, cautious projections, and renewed balance sheet actions. The details show how officials balanced labor risks, inflation pressures and market stability during the December 9–10, 2025 meeting.