Fed meeting minutes show that policymakers see immigration and tariff shifts as creating uncertainty about inflation

The Federal Reserve’s policy-making arm on Wednesday released minutes from its latest meeting in which central bank officials noted that uncertainty surrounding how… President-elect Trump The policies that will be implemented affect their inflation expectations.

The Federal Open Market Committee (FOMC) is charged with making monetary policy decisions and consists of a rotating group of regional experts Federal Reserve Bank presidents who set the central bank’s target range for the benchmark federal interest rate.

Minutes from the Fed’s December meeting, where policymakers cut interest rates by 25 basis points to a range of 4.25% to 4.5%, showed uncertainty among FOMC members about the direction of economic conditions as well as future policy shifts. Fed Chairman Jerome Powell noted that the cut was a “closer call” due to stubborn inflation and a declining labor market, adding that the Fed may look to slow the pace of interest rate adjustments in the future.

“With regard to inflation expectations, participants expected inflation to continue to move towards 2 per cent, although they noted that recent higher-than-expected readings on inflation, and the effects of potential changes in trade and immigration policy, suggest that inflation will continue to move towards 2 per cent. The minutes of the Federal Open Market Committee meeting said that the process may take longer than previously expected.

The Fed’s preferred measure of inflation in November was lower than expected, but still elevated

The minutes added that many participants indicated that the disinflation process may have stalled, or that there is a risk that it may stall, leaving inflation above the Fed’s 2% target. The latest reading of the Consumer Price Index (CPI) came in at 2.7%, which favors the Federal Reserve Inflation measureThe personal consumption expenditures index reached 2.4%.

Other participants indicated that positive feelings in Financial markets The momentum of economic activity could put upward pressure on inflation, while there was consensus on the political uncertainty associated with the incoming administration.

“All participants considered uncertainty about the scope, timing, and effects of potential policy changes affecting trade and immigration to be high,” the FOMC minutes noted.

The Federal Reserve cuts interest rates by a quarter point in December

Trump has called for mass deportations of illegal immigrants, and recently pushed back on reports that his transition team was easing procedures. Tariff plans He spoke during the presidential campaign. Economists have raised concerns that these policies could put upward pressure on consumer prices, which FOMC members noted in meeting minutes.

“Almost all participants viewed upside risks to inflation expectations as having increased. As a reason for this judgement, participants pointed to stronger-than-expected recent readings on inflation and the potential impacts of potential changes in trade and the economy. Immigration policy“, stated in the record.

Fed watchers noted the high degree of uncertainty in the FOMC minutes regarding the path of interest rates, inflation, and economic growth resulting from the new administration’s plans.

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“The word ‘uncertain’ or any derivation thereof was mentioned a dozen times throughout the FOMC’s official record,” noted Jeffrey Roach, chief economist at LPL Financial. “Broadcasters are finding it increasingly difficult to chart a path for interest rates.” Growth and Inflation “Because of the uncertainty surrounding Trump’s policies that are still evolving.”