United States Interest Rate

Minutes from the Fed's December meeting noted that most of the FOMC judged that rate cuts are likely to be appropriate next year if inflation eases over time. Still, policymakers were divided in their assessment of risks between higher inflation and unemployment, with a part of the FOMC displaying greater concern that inflation becoming entrenched may require higher borrowing costs, while others preferred a greater magnitude of rate cuts to curb signs of a softening labor market. The December meeting saw a reduction in the federal funds rate by 25bps to a range of 3.5%–3.75%, matching the consensus by markets, for a third cut in the year. The decision featured two dissents, with two members opting for a hold while new FOMC Governor Miran opted for a 50bps cut. Additionally, the SEP featured in the meeting indicated that policymakers were more optimistic about growth next year, reflecting a smaller-than-expected initial impact from tariffs.