Interest Rates Could Be on Hold 'For Some Time,' Fed Minutes Show

Federal Reserve officials are signaling they may step back from further interest-rate cuts after easing policy three times this year, opting instead to wait and see how the economy responds, according to minutes from the central bank’s latest meeting.

The minutes reveal that some policymakers believe holding rates steady “for some time” would allow the Fed to better judge whether inflation is truly moving lower and how recent cuts are affecting growth and the labor market, Marketwatch reports.

Officials emphasized the need for greater confidence that inflation is on a sustainable path back toward the Fed’s 2% target.

“We want time to acquire more confidence about inflation,” the minutes said, underscoring a cautious tone that suggests rate cuts are no longer on a preset course.

Heather Long, chief economist at Navy Federal Credit Union, said the Fed appears comfortable waiting.

“The Fed is not in a rush to cut interest rates again in early 2026,” Long said. “Fed leaders think they have done a lot to help the labor market and the overall economy, and they want to wait and see what happens.”

At its December meeting, the Fed voted 9–3 to lower rates by a quarter percentage point, marking the third straight cut.

But the decision was far from unanimous. Two dissenting officials favored leaving rates unchanged, while another argued for a larger reduction, highlighting growing divisions within the central bank.

The minutes show that even some officials who supported the cut saw it as a close call. “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,” the minutes noted.

Concerns about the labor market weighed heavily in favor of cutting rates. Unemployment has crept higher throughout the year, rising to 4.6% in November from about 4% at the start of 2025.

Policymakers worried that further weakness could emerge if borrowing costs remained too restrictive.

Still, those who opposed the cut warned that progress on inflation has slowed. With price pressures proving stubborn, some officials expressed concern that Americans could begin to expect higher inflation — a development Fed research shows can quickly become self-reinforcing.

The central bank will revisit interest rates at its next meeting on Jan. 27–28.

For now, markets overwhelmingly expect no change. The Fed’s own projections point to just one rate cut next year, while investors have priced in slightly less than one cut by April and another later in 2026.

The broader economic picture continues to complicate the Fed’s task. Inflation is expected to remain elevated in the near term, while meaningful improvement in the labor market may take months to materialize.

Adding another layer to the policy outlook, Fed officials also agreed in December to begin slowly expanding the central bank’s balance sheet by purchasing Treasury bills. The move comes amid signs that liquidity is tightening in money markets.

According to the minutes, officials have grown concerned about widening spreads between key money-market rates and the interest rate paid on reserve balances — a trend that has accelerated since September.

Some policymakers noted the pace of the increase resembles conditions seen in 2019, when a sudden spike in money-market rates forced the Fed to step in.

For now, the message from the Fed is clear: after a year of easing, patience may be the next policy move.