The Federal Reserve releases the December meeting minutes, showing that “most” officials support continuing rate cuts, but some policymakers advocate for a pause “for some time,” marking the largest internal disagreement in 37 years. This article is sourced from Li Dan, Wall Street Journal, compiled, translated, and written by BlockBeats.
(Background: Recap of the Fed’s rate cut cycle: What’s next for Bitcoin, US stocks, and gold?)
(Additional context: December rate cut probability jumps to 73%! Fed’s Williams wavers: The Fed still has room to cut rates soon)

Table of Contents

• “Most” participants support a rate cut in December, with a minority possibly supporting no change
• Most participants believe rate cuts help prevent labor market deterioration; some point to ingrained inflation risks
• Reserve balances have fallen to sufficient levels

The minutes show that, despite overcoming significant internal disagreements three weeks ago to decide on further rate cuts, most officials expect that if the downward trend in inflation aligns with their expectations, further rate cuts would be appropriate in the future. However, some policymakers believe that the rate hike pause should be maintained “for some time,” reflecting the Fed’s cautious attitude toward rate cuts early next year.

On Tuesday, December 30, Eastern Time, the Fed released the minutes of the December 9-10 monetary policy meeting, which stated that, when discussing the outlook for monetary policy, participants expressed differing views on whether the Federal Open Market Committee (FOMC) has a restrictive stance:

Most participants believe that if inflation gradually declines as expected, further rate cuts may be appropriate.

Regarding the magnitude and timing of further rate cuts, “some” participants indicated that, based on their economic outlook, after this meeting’s rate cut, “it may be necessary to hold the (federal funds rate) target range unchanged for some time”:

A few participants pointed out that this approach allows policymakers to assess how the recent neutral policy stance of the FOMC affects the labor market and economic activity with a lag, while also giving policymakers time to gain more confidence that inflation will return to 2%.

All participants agree that monetary policy is not predetermined but will be formulated based on the latest data, evolving economic outlooks, and risk assessments.

“Most” participants support a rate cut in December, with a minority possibly supporting no change

Three weeks ago, the Fed, as expected by markets, cut rates by 25 basis points for the third consecutive FOMC meeting, but for the first time in six years, three votes opposed the rate decision. Among the dissenters, Trump-appointed director Milan continued to advocate for a 50 basis point cut, two regional Fed presidents supported holding rates steady, and four non-voting officials also believed rates should remain unchanged, totaling seven dissenting votes. This indicates the largest internal disagreement at the Fed in 37 years.

The minutes also reveal divisions within the Fed regarding the December rate cut.

The minutes state that participants noted that inflation has risen since the beginning of this year and remains elevated, with current indicators showing moderate economic growth. They observed that employment growth has slowed this year, with the unemployment rate slightly rising as of September. Participants assessed that recent indicators are consistent with these conditions, and “the downside risks to employment have increased in recent months.”

Against this background, “most” participants support a rate cut at the December meeting, while “some” lean toward holding rates steady.

Among those supporting a rate cut, a few suggest that this decision was made after careful consideration, or that they might have supported keeping the (federal funds rate) target range unchanged.

Participants supporting a rate cut generally believe that this is appropriate because downside risks to employment have increased in recent months, while upside risks to inflation have diminished or remained roughly unchanged since early 2025.

The minutes show that policymakers inclined toward no rate cut in December are concerned about inflation progress; they either believe that the decline in inflation this year has stagnated or that they need more confidence that inflation can fall back to the Fed’s 2% target. These participants also pointed out that if inflation cannot return to 2 in a timely manner, long-term inflation expectations could rise.

The minutes further mention that “some” participants who support or might support a pause believe that during the interval between the next two FOMC meetings, a large amount of labor market and inflation data will be released, which will help determine whether a rate cut is necessary. A few participants think that a rate cut in December is unreasonable because the data received between the November and December meetings do not show any significant further softening in the labor market.

Most participants believe rate cuts help prevent labor market deterioration, with some pointing to ingrained inflation risks

Although internal disagreements are evident, the divisions reflected in the minutes are not as severe as some external sources have suggested.

First, the previous November meeting minutes showed that, at that time, many participants believed it might be appropriate to hold rates steady this year, while several others thought further rate cuts were suitable. Nick Timiraos, a senior Fed reporter known as the “New Federal Reserve Correspondent,” pointed out that “many” refers to a larger number than “several,” but most officials still believed that rate cuts should be considered in the future, whether or not in December.

The current minutes show that at the December meeting, most participants supported a rate cut that month, including some officials who previously leaned toward a pause.

Second, the minutes also reveal significant disagreement among Fed policymakers on whether inflation or unemployment poses a greater threat to the US economy. Most believe that rate cuts help prevent labor market deterioration. The minutes state:

When discussing risk factors that could influence the outlook for monetary policy, participants generally believe that the risks of higher inflation remain elevated, and the risks of a decline in employment are also high and have increased since mid-2025. Most participants indicate that shifting to a more neutral policy stance would help prevent a severe deterioration of the labor market. Many of these participants also believe that current evidence suggests the likelihood of tariffs causing persistent high inflation pressures has decreased.

In contrast, Fed officials who favor no rate cut emphasize inflation risks. The minutes state:

Several participants pointed out the risk that inflation could become ingrained, and believe that further lowering policy rates amid high inflation data could be misinterpreted as a weakening of the Fed’s commitment to the 2% inflation target. They emphasize the need for cautious risk assessment and agree that maintaining solid long-term inflation expectations is crucial for achieving the Committee’s dual mandate.

Reserve balances have fallen to sufficient levels

At the December meeting, the Fed, as anticipated by Wall Street, initiated reserve management (RMP), deciding to purchase short-term government bonds at year-end to address pressures in the money markets. The statement from that meeting read:

The FOMC believes that reserve balances have fallen to sufficient levels and will begin purchasing short-term government bonds as needed to maintain ample reserve supply.

The minutes also reaffirmed that the condition for initiating RMP is that reserve balances have reached a sufficient level. The minutes state:

During discussions on the balance sheet, participants unanimously agreed that “reserve balances have fallen to sufficient levels,” and that the FOMC “will purchase short-term government bonds as needed to continue maintaining ample reserve supply.”