Fed Releases December Meeting Minutes: Internal Divisions, Policy Moves into "Adjustment" Phase

The US Federal Reserve (FED) just released the minutes of the monetary policy meeting held on December 9–10, revealing many important details about the interest rate stance, economic assessments, and increasingly clear differences in viewpoints within the organization. Below is an overview from these meeting minutes. Interest Rate Cut Decision and Internal Disagreements At the meeting, the FED cut interest rates by 25 basis points, bringing the policy rate to the 3.50%–3.75% range. However, this decision was not unanimously agreed upon, with three dissenting votes: Two regional FED Chairs believed that a rate cut was unnecessary at this time. Stephen Miran, a member of the FED Board of Governors, argued that a 25 basis point cut was insufficient, and he continued to call for a sharp 50 basis point reduction—this was his third such call since taking office in September. This indicates that internal FED perspectives on risks and policy priorities are quite different. Debate Over Timing and Direction of Policy A minority group believes that cutting interest rates in December is premature, citing concerns that inflation still poses a prolonged risk. Conversely, the majority of members support a rate cut, arguing that shifting to a more neutral stance will help prevent a weakening of the labor market in the near future. Some advocates of the cut also acknowledge that this is a tough decision, and under different circumstances, they might prefer to keep rates unchanged. Inflation: An Unavoidable Risk Despite the rate cut, many FED officials remain cautious about inflation risks: Some members warned that prolonged high inflation could have already “taken deep root,” and that continuing to lower rates too quickly could undermine the FED’s credibility in achieving its 2% inflation target. Therefore, many believe that interest rates should remain “stable for a period” after the December cut to observe additional economic data. Reserves and Treasury Bond Purchases The minutes also explicitly address reserve management: Members agreed that current reserve levels have fallen to a “sufficient” level. The FED believes it is time to start managing reserves by purchasing US Treasury bonds. More importantly, policymakers emphasized the need to communicate clearly that these bond purchases are solely aimed at stabilizing interest rates, not easing monetary policy or changing the policy stance. Economic Outlook and Future Easing Conditions Compared to the October meeting, the FED’s outlook for economic growth is slightly more optimistic. Additionally: Most members believe further monetary easing would be appropriate if inflation continues to decline over time. However, all future decisions will depend closely on data, especially inflation and the labor market. Chair Jerome Powell’s Statement: Differences Are Real In his post-meeting remarks, FED Chair Jerome Powell candidly acknowledged internal differences: “There are members with very strong views on which risks should be prioritized in policy. This is not a situation where everyone agrees on the direction and what needs to be done.” He also emphasized that inflation remains above target, but signs of labor market weakening cannot be ignored. Conclusion The December meeting minutes show that the FED is entering a phase of fine-tuning operations, where each decision must balance controlling inflation and protecting growth—its job. Internal divisions are not necessarily a negative sign but reflect the complexity of the current economic landscape. Going forward, markets will continue to closely monitor inflation data, employment figures, and FED communications, as even small shifts in tone can trigger significant waves in the global financial markets.