Most Fed officials see more rate cuts ahead as long as inflation cools, minutes reveal

• Six of 19 central bankers recommended keeping rates at 3.75%-4% through 2025, with the median forecast showing only one rate cut for all of 2026
• Several officials warned that cutting rates amid elevated inflation could signal weakened commitment to the Fed's 2% inflation target
• Four new regional Fed presidents with hawkish leanings will gain voting power in 2026, potentially making future rate cuts more difficult

The Federal Reserve's December 9-10 meeting minutes revealed significant divisions among policymakers regarding future rate cuts, with officials cutting rates to 3.5%-3.75% in a 9-3 vote—the most dissents since 2019. Governor Stephen Miran favored a more aggressive half-point cut, while Presidents Austan Goolsbee (Chicago Fed) and Jeff Schmid (Kansas City Fed) opposed any reduction.

The split extends beyond voting members: six of 19 central bankers believe rates should remain at 3.75%-4% through 2025. The median forecast projects only one rate cut for all of 2026. Several officials who supported December's cut described their decision as "finely balanced," expressing concerns that further cuts amid elevated inflation could signal weakened commitment to the 2% inflation target.

Economic data complications emerged from a government shutdown, with Fed Chairman Jerome Powell warning that jobs reports could overstate employment by up to 60,000 positions monthly. November data showed unemployment at its highest since 2021, while the Consumer Price Index data was referenced but not specified. Fourth-quarter GDP grew at 4.3%—the fastest pace in two years—potentially complicating inflation control efforts.

The 2026 Federal Open Market Committee composition will shift as four new regional presidents gain voting rights: Beth Hammack (Cleveland), Anna Paulson (Philadelphia), Lorie Logan (Dallas), and Neel Kashkari (Minneapolis). All have signaled hawkish positions on rate cuts.

Market implications suggest a slower pace of rate reductions than previously anticipated, with Fed officials prioritizing inflation control over labor market concerns. The deep divisions and incoming hawkish voters indicate potential challenges for those expecting aggressive monetary easing in 2025-2026.