WASHINGTON (AFP) – United States (US) Federal Reserve officials raised concerns in December that the fight against inflation may have “stalled” in recent months, and weighed the likely impact of Trump’s trade policies, according to minutes of the meeting published on Wednesday.
The central bank voted 11-to-1 last month in favour of cutting interest rates by a quarter point and signalled a slower pace of cuts ahead, raising concerns that interest rates may have to remain higher for longer.
The decision was taken against the backdrop of a small uptick in inflation over the last few months of the year, moving the Fed’s favoured inflation gauge away from its long-term target of two percent.
At the same time, growth has remained robust and the labour market relatively resilient, reducing the pressure on the Fed to cut rates swiftly.
The Fed’s decision to cut rates to between 4.25 and 4.5 per cent was not unanimous – an unusual occurrence – with Cleveland Fed president Beth Hammack voting to leave rates unchanged.
During the meeting, “several” members of the Fed’s rate-setting committee raised concerns that the “disinflationary process may have stalled temporarily or noted the risk that it could,” the Fed said in minutes of the meeting published on Wednesday. “Almost all participants judged that upside risks to the inflation outlook had increased,” it added.
Fed officials were also concerned about how to model the likely impact of changes to trade and immigration policy pledged by Donald Trump on the inflation fight – although they did not refer to the Republican president-elect by name.
Trump’s team has pledged to impose sweeping tariffs on goods entering the US and to deport millions of undocumented workers, leading many economists to predict inflation could be higher than previously predicted, and growth lower.
