Rising Inflation Risks Prompt Decision by the Fed to Pause Rate Cuts
Meeting minutes recently released by the Federal Reserve of the Federal Open Market Committee’s (FOMC) January 28-29th meeting revealed concerns among Fed officials of the potential of inflation rising higher due to factors such as Pres. Trump’s “proposed tariffs and mass deportations of migrants, as well as strong consumer spending.” Despite the Consumer Price Index for All Urban Consumers (CPI-U) holding steady at 0.2 percent on a seasonally adjusted basis last year from August through October, the index has steadily risen by 0.1 percent from November 2024 through January 2025, reaching 0.5 percent according to the latest news release by the U.S. Bureau of Labor Statistics (BLS). In contrast, the all items less food and energy index, known as the ‘Core CPI’ and the preferred index among economists because food and energy have very volatile prices, held steady at 0.3 percent on a seasonally adjusted basis from August through November, lowering to 0.2 percent in December, and rising to 0.4 percent in January. Although the Fed follows a separate inflation measure that shows inflation is closer to 2.5% versus the 3.0% rate indicated by BLS, a “high degree of uncertainty” surrounding the economy was also cited in the minutes of the January meeting, making “it appropriate for the Fed to ‘take a careful approach’ in considering any further changes to its key interest rate” currently held at a range of 4-1/4 to 4-1/2 percent, leading many economists to forecast just one — if any — rate cut in 2025.
Source: https://apnews.com/article/federal-reserve-minutes-inflation-ad359f208bdf9d3861768e748f9330b7