In a display of cautious deliberation—or perhaps just elegant procrastination—Federal Reserve officials decided in December to ease up on the throttle of rate cuts, citing lingering inflation risks and a suspiciously resilient economy. The minutes from the Federal Open Market Committee’s Dec. 17-18 meeting revealed a newfound fondness for taking it slow. After all, when the stakes are this high, who wouldn’t want to deliberate a bit longer?

“Participants indicated that the committee was at or near the point at which it would be appropriate to slow the pace of policy easing,” the minutes declared, suggesting the usual Fed way of saying, “Let’s just see what happens next.” Many attendees highlighted a buffet of factors demanding careful consideration in the months ahead, including elevated inflation readings and robust spending that just won’t quit.

At the same meeting, the Fed trimmed its benchmark lending rate by a quarter-point to 4.25% to 4.5%. This marked a whole percentage point in cuts since September—an impressive sprint in central banking terms—though not without a few dissenters huffing at the pace.
Adding a dash of political intrigue, the Fed’s staff incorporated “placeholder assumptions” about the impending Trump administration’s policies. Apparently, the mere spectre of tariffs, tax cuts, and immigration changes was enough to nudge growth forecasts down a peg, with inflation stubbornly expected to hold its ground. A “number” of policymakers acknowledged they’d also added their own placeholders, just in case Trump’s economic playbook proved, shall we say, unconventional.

The minutes noted with characteristic understatement that “Almost all participants judged that upside risks to the inflation outlook had increased. “Still, the committee was optimistic about the jobs market—though they wisely hedged their bets, suggesting the labour market “merited close monitoring.” In Fed-speak, that’s shorthand for “keep your eyes peeled.”
Chair Jerome Powell himself admitted the December cut was a “closer call” than previous decisions. According to the minutes, some participants felt there was merit in holding rates steady, while others were teetering on the fence. Cleveland Fed President Beth Hammack dissented, preferring a steady hand, and three other officials apparently shared her reservations. Meanwhile, Governor Michelle Bowman stuck to her guns, opposing a half-point cut in September in favour of a more modest reduction.

The Fed’s projections after the December meeting painted a slightly less dramatic picture of 2025. Policymakers forecasted two rate cuts instead of the four pencilled in back in September. Clearly, the committee was grappling with a fresh bout of inflation-induced anxiety.
The numbers back their caution. The Fed’s preferred inflation gauge—the personal consumption expenditures price index—was up 2.4% in the year through November, or 2.8% if you conveniently ignore food and energy. Since the meeting, Fed officials have taken every opportunity to stress their commitment to moving at a snail’s pace on rate cuts until inflation shows signs of finally cooling off.

“Since September, the labour market has been somewhat more resilient, while inflation has been stickier than I assumed at that time,” Fed Governor Lisa Cook said on Monday, summing up the committee’s collective mood. “Thus, I think we can afford to proceed more cautiously with further cuts.” Translation: the Fed would rather inch forward than trip over itself.

Of course, all this comes against the backdrop of the Trump administration’s forthcoming policy smorgasbord, with tariffs, taxes, and immigration reforms poised to inject a hearty dose of unpredictability into the Fed’s carefully crafted forecasts. Whether the central bank’s newfound caution proves prophetic or paralysing remains to be seen, but for now, their message is clear: don’t expect any sudden moves.