Federal Reserve Minutes: Policymaker Debates on Economic Policy, Inflation Progress, and Future Reviews

Most Federal Reserve policymakers acknowledged the risks of lowering interest rates too quickly and stressed the importance of waiting for more data to assess if inflation is moving steadily toward 2%.

Federal Reserve policymakers generally agreed that it wasn’t appropriate to decrease the funds rate until they were more confident that inflation was moving sustainably toward 2%.

While risks to meeting the Fed’s dual mandate goals were more balanced, officials remained highly focused on potential inflation risks.

Several policymakers highlighted the importance of clearly communicating the Fed’s data-dependent approach.

The Fed staff’s economic outlook was slightly more optimistic than in December.

Many officials suggested that it was time to start discussing the balance sheet in more detail at the next meeting, considering the decrease in overnight reverse repo usage.

The Fed staff identified risks to the economic forecast leaning towards the downside.

US short-term interest-rate futures dropped further after the January FOMC meeting minutes were released.

The Fed staff considered the possibility that progress in lowering inflation might take longer than anticipated.

Some policymakers suggested that slowing the pace of balance sheet reduction could ease the transition to a sufficient level of reserves and allow the process to continue for a longer period.

Futures contracts for Fed funds continue to indicate that the first rate cut could happen in June.