The Federal Reserve meeting minutes show that most officials support a rate cut in December and expect further rate cuts in the future, but some policymakers believe that rate cuts should be paused “for a period of time,” reflecting cautious attitudes toward rate cuts early next year, with significant internal disagreements. This article is sourced from Wall Street Insights, organized, translated, and written by Foresight News.
(Previous summary: The Fed’s rate cut by 1 basis point meets expectations! The dot plot indicates only one rate cut in 2026, Bitcoin and Ethereum fluctuate wildly, and US stocks see intraday gains)
(Additional background: The printing press is back in action! The Federal Reserve has launched the “Reserve Management Purchase Program,” and starting from 12/12, it will buy $40 billion worth of short-term government bonds within 30 days)

Table of Contents

• “Most” participants support a December rate cut
• Most participants believe rate cuts help prevent labor market deterioration; some point to entrenched inflation risks
• Reserve balances have fallen to adequate levels

On the 30th, Eastern Time, the Federal Reserve released the minutes of the monetary policy meeting held on December 9-10, which stated that during discussions on the outlook for monetary policy, participants expressed differing views on whether the Federal Open Market Committee (FOMC) has a restrictive stance.

“Most participants believe that if inflation gradually declines as expected, it may be appropriate to further” cut rates.

Regarding the magnitude and timing of further rate cuts, some participants indicated that, based on their economic outlook, after this meeting’s rate cut, “it may be necessary to keep the (Federal Funds Rate) target range unchanged for a period.”

"A minority of participants pointed out that this approach allows policymakers to assess how the recent more neutral stance of the FOMC affects the labor market and economic activity with a lag, while also giving policymakers time to gain more confidence that inflation will return to 2%.

All participants agreed that monetary policy is not preset but will be formulated based on the latest data, evolving economic outlook, and risk balance."

###Most" participants support a December rate cut

Three weeks ago, as market expectations suggested, the FOMC cut rates by 25 basis points for the third consecutive meeting, but for the first time in six years, three votes opposed the rate decision. Among the opponents, Trump-appointed director Milan continued to advocate for a 50 basis point cut, two regional Federal Reserve presidents supported holding rates steady, and along with the dot plot, four non-voting officials also believed rates should remain unchanged, totaling seven dissenters. This marks the largest internal disagreement within the Fed in 37 years.

The minutes also reveal divisions within the Fed regarding the December rate cut.

The minutes state that participants noted that inflation has risen since the beginning of this year and remains elevated, with current indicators showing economic activity expanding at a modest pace. They observed that employment growth has slowed this year, with the unemployment rate slightly rising as of September. Participants assessed that recent indicators are consistent with these conditions, and “the downside risks to employment have increased in recent months.”

Given this background, “most” participants support a rate cut at the December meeting, while some prefer to keep rates unchanged. “Among those supporting a rate cut, a few indicated that this decision was made after careful consideration, or that they might have supported maintaining the (Federal Funds Rate) target range.”

Supporters of rate cuts generally believe that this decision is appropriate because downside risks to employment have increased in recent months, while upside risks to inflation have diminished or remained roughly unchanged since early 2025.

The minutes show that policymakers inclined to hold rates steady in December are concerned about inflation progress; they either believe that progress in inflation reduction has stalled this year or that more confidence is needed that inflation can fall back to the Fed’s 2% target. These participants also pointed out that if inflation cannot return to 2% in a timely manner, long-term inflation expectations could rise.

The minutes further mention that some supporters or potential supporters of holding rates steady believe that during the interval between the next two FOMC meetings, a large amount of labor market and inflation data will be released, which will help determine whether a rate cut is necessary. A minority of participants believe that a rate cut in December is unwarranted because the data received between the November and December meetings do not show any significant further softening in the labor market.

###Most" participants believe rate cuts help prevent labor market deterioration; some point to entrenched inflation risks

Although internal disagreements are evident, the divisions reflected in these minutes are not as severe as some external sources have suggested.

First, the previous November meeting minutes showed that many participants believed it might be appropriate to hold rates steady this year, while some thought further rate cuts were suitable. Nick Timiraos, a senior Fed reporter known as the “New Federal Reserve Correspondent,” pointed out that most officials still believed rates should be lowered in the future, whether or not in December.

This time, the minutes indicate that at the December meeting, most participants supported a rate cut that month, including some officials who previously leaned toward pausing this month.

Second, the minutes also show that there is considerable disagreement among Fed policymakers about whether inflation or unemployment poses a greater threat to the US economy in December. Most believe that rate cuts help avoid labor market deterioration. The minutes state:

“When discussing risk management factors that could influence the outlook for monetary policy, participants generally believed that upside risks to inflation remain high, and downside risks to employment have also increased since mid-2025. Most participants noted that shifting to a more neutral policy stance would help prevent a severe deterioration of the labor market. Several of these participants also believe that existing evidence suggests the likelihood of tariffs causing persistent high inflation pressures has decreased.”

In contrast, Fed officials supporting no rate cuts emphasize inflation risks. The minutes state:

“Some participants pointed out the risk that inflation could become entrenched, and believed that further reductions in policy rates amid high inflation data could be misinterpreted as a weakening of the committee’s commitment to the 2% inflation target. They emphasized the need for cautious risk assessment and unanimously agreed that solid long-term inflation expectations are crucial for achieving the committee’s dual mandate.”

###Reserve balances have fallen to adequate levels

At the December meeting, as market participants anticipated, the Fed launched the (Reserve Management Program) (RMP), deciding to purchase short-term government bonds by the end of the year to address pressures in the money markets. The statement from that meeting read:

“The FOMC believes that reserve balances have fallen to adequate levels and will begin purchasing short-term government bonds as needed to maintain ample reserve supply.”

The minutes also reaffirmed that the conditions for initiating the RMP have been met. It states that during discussions on the balance sheet, participants unanimously agreed that “reserve balances have fallen to adequate levels,” and the FOMC will purchase short-term government bonds as needed to continue maintaining ample reserve supply.