Fed minutes show most officials want more inflation progress before cuts
Federal Reserve officials gave a cautious signal in minutes released Wednesday, saying most on the central bank’s rate-setting committee wanted to see more progress on inflation before backing additional interest-rate cuts this year, especially if hiring continues to stabilize.
The minutes covered the Fed’s Jan. 27-28 meeting, when the committee kept its key rate steady at about 3.6% after cutting it three times late last year. The minutes said the “vast majority” of the 19 participants saw signs that the job market had stabilized, pointing to a change in the labor-market trend after the unemployment rate rose in late 2025.
Several officials also described the policy rate as close to a level that neither stimulates nor restrains the economy. The minutes described a committee that was “deeply divided,” with different camps forming around how long to wait for inflation to cool enough to justify further easing and what guidance to provide about future moves.
One group of officials said additional cuts will “likely be appropriate” if inflation continues to decline. Another group favored keeping rates unchanged “for some time,” and still others said they could have supported language that would indicate the next step could be either a cut or a rate hike if inflation stays above the Fed’s 2% target.
The minutes highlighted that openness to a potential rate hike could represent a shift in tone from earlier meetings. Chair Jerome Powell had said in the past that the idea of a rate hike was not on the table, and after the January meeting he signaled that the Fed could wait for a few months before cutting again, emphasizing that hiring and the broader economy had improved since the Fed’s December meeting.
Powell said the Fed was “well positioned” to evaluate how the economy evolves before making further moves. Those comments came after the January decision, which maintained rates despite political pressure from President Donald Trump for the Fed to cut its key rate to as low as 1%, a level few economists endorse.
The minutes tied the committee’s decision to the evolving balance between inflation and labor conditions. They said the “vast majority” of officials agreed that risks of job losses and a worsening labor market had diminished, a factor the minutes characterized as a key reason officials backed the hold rather than additional cuts.
At the same time, the minutes pointed to inflation remaining above target. Consumer prices grew 2.4% in January from a year earlier, the government said, which is not far from the Fed’s 2% goal. But the Fed uses a preferred inflation measure that runs higher, the minutes said, with housing and apartment-rental costs carrying less weight as they have cooled—while that preferred measure continues to sit above the better-known CPI gauge. For the article’s date, the Fed’s preferred inflation measure (PCE Price Index, PCEPI) ran at 2.7728523632629063% year over year (yoy), while headline CPI (CPIAUCSL) was 2.391201432150015% year over year (yoy).
On jobs, the minutes reflected a supportive read of recent data. The government said employers added 130,000 jobs in January, the biggest gain in just over a year, and that the unemployment rate slipped to 4.3% from 4.4%. The Fed’s January hold also drew on that momentum, with Fed officials including Michael Barr citing the labor market as “stabilizing” while inflation remained above 2%.
Barr said, “Based on current conditions and the data in hand, it will likely be appropriate to hold rates steady for some time.” Separately, Austan Goolsbee, president of the Federal Reserve Bank of Chicago, told CNBC that the Fed could reduce rates “several more” times this year if there is evidence that inflation is moving closer to 2%.
The minutes also showed the committee’s policy-making disagreement. Two Fed governors—Stephen Miran and Christopher Waller—voted for another quarter-point cut rather than the hold, underscoring that even when many officials agree rates are near a neutral level, they differ on how fast inflation progress must come and what signals the Fed should prepare for next.