The minutes from the Fed’s December meeting showed there is a growing sense among Fed members that inflation is under control. The Fed cited the decline we’ve seen in their favored inflation measure, Core Personal Consumption Expenditures, which strips out volatile food and energy prices. The Fed also acknowledged that there is a risk to the economy if they remain “overly restrictive.”
What’s the bottom line? After hiking their benchmark Fed Funds Rate (the overnight borrowing rate for banks) eleven times since March of 2022 to slow the economy and tame inflation, almost all participants indicated that a lower Fed Funds Rate would be appropriate by the end of this year. However, the minutes did not provide any insights regarding when rate cuts might occur. To cover their bases, the Fed noted that there was “an unusually elevated degree of uncertainty” and that further hikes to the Fed Funds Rate are still possible.