The Fed minutes have been released: Upside risks to the inflation outlook have increased.

The Fed published the minutes of the Federal Open Market Committee (FOMC) meeting held on December 17-18, 2024. The minutes of the last meeting, where the policy interest rate was lowered by 25 basis points to a range of 4.25-4.50%, indicated that upward inflation risks were considered to have increased.

INFLATION MAY MOVE TOWARD 2%

Although Trump's name was not mentioned, the minutes highlighted the potential effects of possible policy changes, stating, "Officials expect inflation to continue moving toward 2%, but recent inflation data has been higher than expected, and the potential impacts of changes in trade and immigration policy suggest that the process may take longer than previously anticipated."

DECREASE PROCESS OBSERVED AS TEMPORARY

The minutes noted that some officials observed that the decrease in inflation may have temporarily stalled or indicated the existence of such a risk, and several officials assessed that the positive sentiment in financial markets and the momentum in economic activity could continue to exert upward pressure on inflation.

The bank's minutes indicated that all officials believed there was high uncertainty regarding the scope, timing, and economic effects of potential changes in policies affecting foreign trade and immigration, and some officials included their assumptions on these issues in their projections.

ALMOST ALL SHARE THE SAME VIEW

The minutes stated, "Almost all officials assessed that the upward risks to the inflation outlook have increased. Officials indicated that the FOMC is at or near the point where it would be appropriate to slow the pace of policy easing."

The bank's minutes reported that officials noted that if the data comes in as expected, inflation continues to decline sustainably toward the 2% target, and the economy remains close to maximum employment, it would be appropriate to gradually move toward a more neutral policy stance over time.

Trump, the elected President of the United States, had announced plans to significantly increase tariffs on imports upon taking office. The Fed's next meeting will be held on January 28-29.