Fed minutes show it could be ‘some time’ before another rate cut

00:00 Brooke

The Federal Reserve released minutes from its December meeting that showed a tight split on the latest rate cut. Yahoo Finance senior Fed correspondent Jennifer Schonberger joins us now with the details. Jen.

00:15 Jennifer Schonberger

Hello Brooke. This is true. The Fed’s rate cut in December was a close call for some; Others think it will take some time to cut rates again, according to minutes of the December policy meeting released this afternoon.

00:30 Jennifer Schonberger

Reading excerpts from these minutes, most participants agreed that further downward adjustments to the Fed funds rate target range would likely be appropriate if inflation declines over time as expected. Regarding the scope and timing of additional adjustments to the Fed funds rate target range, some participants suggested that, given their economic outlook, it may be appropriate for the target range to remain unchanged for some time after the range is lowered at this meeting.

00:58 Jennifer Schonberger

Officials are divided when it comes to lowering interest rates this month. While most officials preferred to lower interest rates due to concerns about the employment market, there were also those who supported keeping interest rates steady due to concerns that inflation would stop there. Now, there were some who voted in favor of lowering the rates, but they might have voted in favor of keeping the rates unchanged because they thought we would get a bunch of new data after the meeting.

01:21 Jennifer Schonberger

This will better inform our decision on whether we need to lower interest rates again. And yet there were a few people, some of whom we know, including Kansas City Fed President Jeff Schmid, who thought the rate cut was not justified because there was no significant deterioration in the job market.

01:34 Jennifer Schonberger

Now, looking ahead to next year in terms of inflation and the employment market outlook, Fed officials still believe inflation will remain somewhat elevated in the near term. However, they think the upward pressure from tariffs on inflation will begin to ease, although the extent and timing of this remains unclear. There is upward pressure on businesses’ costs and concern that tariffs may still be passed on to consumers. So they pay attention to this.

02:07 Jennifer Schonberger

Now as for the job market, they think it will stabilize next year, but the outlook is uncertain as we have a delay in official government data due to the shutdown. Still, many see downside risks to the job market. As a result, Brooke, these minutes signal that the Fed will not cut interest rates again anytime soon.

02:30 Brooke

Now, Jen, on top of all this, President Trump is also threatening to sue Fed Chairman Jerome Powell and says he will cite his love interest to fire him. So how much of a risk does this pose for the Fed in 2020?

02:45 Jennifer Schonberger

Yeah, I mean look, I would never rule out the president doing something about this, right? That’s always on the table, but these comments that you quote the president made yesterday afternoon also said in the same sentence, look, it’s a little close to the time when I will nominate the next chairman of the Federal Reserve. So maybe I won’t, maybe I will. He left the question mark in the air.

03:09 Jennifer Schonberger

However, once a candidate has been announced and the candidate has gone through the approval process, it is time for that person to take the helm. So it may not be worth it for the president to do this. If he files a lawsuit, I would expect the case to be taken to the Supreme Court. Something we’re seeing from Fed Governor Lisa Cook is a case the Supreme Court will hear next month in January. So it’s possible, but I don’t think it’s possible.