Fed minutes show policymakers see immigration, tariff shifts creating inflation uncertainty

The Federal Reserve’s policymaking arm released minutes of its latest meeting on Wednesday, in which central bank officials noted that uncertainty over how President-elect Trump the policy that will be implemented weighs on the prospect of inflation.

The Federal Open Market Committee (FOMC) is tasked with making monetary policy decisions and consists of a regional rotating group. Federal Reserve Bank governors who set the central bank’s target range for the federal funds rate.

Minutes from the Fed meeting in December, where policymakers cut interest rates by 25 basis points to a range of 4.25%-4.5%, showed uncertainty among FOMC members about the direction of economic conditions as well as the Fed’s future public policy moves Chairman Jerome Powell said tapering was a “closer call” because of persistent inflation and a softening labor market, adding that the Fed could further slow the pace of interest rate adjustments.

“As for the inflation outlook, participants expected inflation to continue to move toward 2 percent, although they noted that recent higher-than-expected inflation readings and the effects of possible changes in trade and immigration policy suggested that: the process may take longer than previously anticipated,” the FOMC minutes said.

FED’S PREFERRED INFLATION GAUGE WAS LOWER THAN EXPECTED IN NOVEMBER BUT REMAINS HIGH.

FOMC minutes showed that policymakers see uncertainty about the path of inflation due to Trump’s potential tariffs and immigration changes. (Photo by Ting Shen/Bloomberg via Getty Images/Getty Images)

The minutes added that several participants indicated that inflation may have stalled, or there is a risk of stalling, leaving inflation above the Fed’s 2% target.The most recent reading of the Consumer Price Index (CPI) was 2 .7%, while the Fed’s preferred index. inflation gaugeknown as the personal consumption expenditure (PCE) index, was 2.4%.

Other participants mentioned that there is a positive attitude financial markets and the momentum in economic activity could put upward pressure on inflation, while there was consensus on policy uncertainty surrounding the incoming administration.

“All participants appreciated that uncertainty about the scope, timing, and economic consequences of potential policy changes affecting trade and immigration has increased,” the FOMC minutes said.

FEDERAL RESERVE reduced interest rates by a quarter point in December.

Federal Reserve Chairman Jerome Powell said after the latest rate cut that the Fed may slow the pace of rate cuts in response to economic conditions. (Photo by Liu Jie/Xinhua via Getty Images / Getty Images)

Trump has called for mass deportations of illegal immigrants and has recently pushed back on reports that his transition team is softening the situation. tariff plans he outlined during the presidential campaign. Economists have expressed concern that these policies could put upward pressure on consumer prices, which FOMC members noted in the minutes of the meeting.

“Almost all respondents assessed that the upside risks to the inflation forecast have increased. As reasons for this judgment, participants cited stronger-than-expected estimates of inflation and the likely effects of trade and trade changes.” immigration policy“, it is said in the record.

Fed-watchers noted the high degree of uncertainty in the FOMC minutes regarding the course of interest rates, inflation and economic growth stemming from the new administration’s plans.

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Jeffrey Roach, chief economist at LPL Financial, noted that the word “uncertain” or a derivative of it was mentioned twelve times in the Federal Open Market Committee’s official records.growth and inflation because of the uncertainty surrounding Trump’s policies.