FOMC Minutes Hint at More Rate Cuts as Economic Outlook Brightens

The Federal Open Market Committee (FOMC) released the minutes of its December meeting, signaling that most officials are open to further interest rate reductions if inflation continues its gradual decline. The document also highlighted a modest upward revision to the U.S. economic growth forecast compared to the October meeting.

Policymakers Weigh the Path Forward

The minutes reveal a nuanced stance among FOMC participants. While a majority favored lowering the Fed funds rate, some officials described the decision as finely balanced, noting that keeping rates unchanged could also be justified under certain economic scenarios. Several participants emphasized that, following a potential December rate cut, it might be appropriate to maintain rates at current levels for a period of time.

Reserve management also drew attention, with officials agreeing that reserve balances had declined to ample levels. They supported initiating Treasury purchases strictly to ensure control over rates, stressing that these operations do not constitute monetary policy actions.

Inflation and Labor Market Considerations

Some participants cautioned that further rate cuts could be misinterpreted as a weakening commitment to the Fed’s 2% inflation target. At the same time, moving toward a more neutral policy stance was seen as a tool to protect the labor market from potential deterioration, reflecting the Committee’s dual focus on inflation and employment stability.

Market Reaction

Following the release of the minutes, the U.S. Dollar (USD) gained moderate strength, with the U.S. Dollar Index (DXY) climbing to around 98.20, up from a recent multi-month low of 97.91. The USD showed particular strength against the British Pound, while movements against other major currencies were relatively modest.


The market remains sensitive to forward guidance from the Fed, with investors closely watching how policymakers balance growth expectations against inflation risks.

Looking Ahead

As the U.S. economy enters 2026, the Fed faces the delicate task of supporting growth while ensuring inflation remains anchored. The FOMC minutes suggest flexibility in future policy moves, with the potential for additional rate cuts if economic conditions evolve as expected.

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