The latest meeting minutes from the U.S. Federal Reserve show that the central bank expects to lower interest rates “gradually” in coming months.
Fed officials expressed confidence that inflation is easing and the labour market remains strong in America, clearing the way for further interest rate cuts albeit at a gradual pace.
The meeting summary contained several statements indicating that central bank officials are comfortable with the current rate of inflation even though it remains above its 2% target.
The minutes also indicate that the Federal Reserve anticipates further interest rate cuts ahead, though when they occur and how aggressively rates come down was not indicated.
“It would likely be appropriate to move gradually toward a more neutral stance of policy over time,” read the Fed meeting minutes.
The U.S. central bank last voted unanimously to lower its benchmark Fed Funds Rate by a quarter of a percentage point (25-basis points) to a target range of 4.50% to 4.75%.
Futures traders are currently betting 63% in favor of another 25-basis point rate cut when the Fed next meets in December.
However, concerns are growing that president-elect Donald Trump’s plans for tax cuts and tariffs will push inflation higher and send the U.S. Federal Reserve to the sidelines in 2025.
Financial markets are currently pricing in a total of three-quarters of a percentage point in interest rate reductions next year.
The Federal Reserve will next announce a decision on interest rates Dec. 18.
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