Federal Reserve December Meeting Minutes Released: Policy Disagreements Emerge Among Officials on Whether to Maintain Easing Path

On December 30, the Federal Reserve released the minutes of the December policy meeting, showing that most officials believe further rate cuts are reasonable as inflation declines as expected. However, there are significant disagreements within the committee regarding the timing, magnitude of rate cuts, and economic risk assessments, which directly cast doubt on the policy outlook.

The minutes indicate that officials face a balancing act in policy formulation. Among them, those supporting continued rate cuts cite the downside risks to the labor market as the primary threat. Previously, some officials who favored maintaining the current stance also acknowledged that this rate cut was a cautious and delicate balance.

However, the majority of officials believe that returning to a neutral stance can prevent deterioration of the labor market. Coupled with the ongoing rise in downside risks to employment since mid-2025, the December rate cut is viewed as a forward-looking risk management move.

Meanwhile, several participants remain highly alert to inflation risks, worried that high inflation could become sticky. They explicitly stated that current inflation remains elevated, and further rate cuts could be interpreted by the market as the Fed weakening its 2% inflation target, thereby damaging policy credibility.

In response, some officials clearly stated that after this rate cut, the policy rate should remain stable for a period to assess the lagged effects of previous policies, awaiting more inflation data to strengthen decision-making.

According to data from CME FedWatch Tool, the current market assigns an 85.1% probability that the Federal Reserve will keep rates unchanged (3.50%~3.75%) at the January 2026 meeting;

The FOMC dot plot forecasts that the Fed will cut rates by 25 basis points in 2026, another 25 basis points in 2027, with the final rate reaching 3.1%.

Overall, the market adjustment reflects a direct response to the internal dovish stance within the Fed and the short-term policy assessment period.