Fed Minutes Show Options Are Open on Interest Rate Cuts

Minutes from the Federal Reserve’s November meeting offered little signal about whether officials would cut interest rates at their next gathering, though they suggested that policymakers did expect to continue to lower borrowing costs “gradually” over time.

The account of the central bank’s Nov. 6-7 meeting, released on Tuesday, showed that Fed officials still planned to cut interest rates further. But with the job market holding up better than expected and the economy growing at a solid clip, they are in no rush to slash them rapidly.

Fed officials thought it “would likely be appropriate to move gradually toward a more neutral stance of policy over time,” the minutes showed.

At the moment, central bankers think that their policy rate — which is set to a range of 4.5 percent to 4.75 percent — is “restrictive,” which means it is high enough to weigh on growth.

That’s by design. Policymakers lifted rates to high levels in 2022 and 2023 to make borrowing more expensive, hoping to cool the economy and wrestle rapid inflation under control. But over the past year, inflation has been slowing toward the Fed’s 2 percent goal, and the unemployment rate had begun to nudge higher.

Given that, officials began to cut rates in September, then made a second rate cut in November. The goal was to ease off the economic brakes a little, allowing the economy to slow gently without risking a painful crash. When Fed officials last released economic forecasts, in September, policymakers expected to make one final quarter-point rate cut in 2024.