Some Federal Reserve officials want to keep interest rates unchanged "for some time" after making three rate cuts this year, minutes from the latest Fed meeting showed.
These officials said that pausing would allow policymakers to gauge the impact of the rate cuts on the economy and also to see if inflation will move lower.
Officials want time "to acquire more confidence about inflation," officials said.
"The Fed is not in a rush to cut interest rates again in early 2026. Fed leaders think they have done a lot not to help the labor market and the overall economy and they want to wait and see what happens," said Heather Long, chief economist at Navy Federal Credit Union, in an email.
The Fed cut interest rates by a quarter percentage point in December, the third straight meeting with such a move. The vote was 9-3 with three dissents - two who supported no change in rates and one who pushed for a larger cut.
"A few of those who supported lowering the policy rate at this meeting indicated the decision was finely balanced or that they could have supported keeping the target range unchanged," according to the minutes of the Dec. 9-10 meeting, which were released on Tuesday.
Concern about the health of the labor market was a large factor in the decision to cut rates. The unemployment rate has risen slowly but steadily this year, hitting 4.6% in November after being at 4% at the beginning of 2025.
Those who argued against the cut expressed concern that progress on bringing inflation down had stalled this year. This raised worries that the public could begin to expect higher prices. Fed research shows that once that happens, inflation can go up quickly.
The Fed will next vote on interest rates at its meeting Jan. 27-28. At the moment, market participants expect no change. The Fed's own forecast expects one cut next year, while the market has priced in just under one rate cut by April and another one later in 2026.
The economic outlook is making life difficult for the Fed. Inflation is expected to remain elevated in the near term, while any improvement in the labor market appears to be months away.
At their December meeting, Fed officials agreed it would be prudent to start to slowly expand the central bank's balance sheet through purchases of Treasury bills.
The minutes show that officials saw signs that liquidity was drying up in money markets, especially as the spreads of the effective federal funds rate and other key money-market rates relative to the interest rate on reserve balances had increased since September. Some Fed officials said that the recent increase in spreads was happening faster than in 2019, when money-market rates spiked and the Fed had to intervene.
