Federal Reserve policymakers unanimously decided to reduce interest rates by 25 basis points to a range of 4.5%-4.75% during their November meeting, as they expressed confidence that inflation was moving sustainably toward their 2% target, according to meeting minutes released Wednesday.

Participants highlighted several factors expected to maintain downward pressure on inflation, including diminishing business pricing power, the Fed’s restrictive monetary policy stance, and well-anchored long-term inflation expectations.

Easing Inflation, But Core Pressures Persist

The minutes revealed that nearly all participants believed the latest data supported the view that inflation was steadily moderating, albeit with volatility in month-to-month readings.

Inflation, they noted, had eased significantly from its peak. However, core inflation measures—excluding volatile food and energy prices—remained “somewhat elevated.”

Policymakers also discussed upside risks to inflation, including potential disruptions in global supply chains due to geopolitical events, a faster-than-anticipated loosening of financial conditions, unexpectedly robust consumer spending, persistent shelter price increases, and surging insurance costs across health, automotive, and housing sectors.

Resilient Economy and Labor Market Underpin Consumer Spending

Economic data reviewed at the meeting pointed to stronger-than-expected growth in consumer spending and overall economic activity.

While participants generally agreed that the labor market remained solid, they emphasized the importance of closely monitoring indicators for signs of softening, which could influence the Fed’s future policy direction.

“Participants remarked that consumption had been supported by a solid labor market, rising real wages, and elevated household wealth,” the minutes stated.  

Diverging Views on Monetary Policy Adjustments

The minutes also shed light on varying perspectives regarding the Fed’s next steps.

While some participants suggested the central bank could pause its easing cycle and hold rates at restrictive levels if inflation remained sticky, others indicated that policy easing could be accelerated if economic conditions weakened, such as a downturn in the labor market or a notable slowdown in economic activity.

“Many participants observed that uncertainties concerning the level of the neutral rate of interest complicated the assessment of the degree of restrictiveness of monetary policy and, in their view, made it appropriate to reduce policy

restraint gradually,” according to the November minutes.

Market Reactions

The release of the Fed meeting minutes had little impact on short-term interest rate markets.

Fed funds futures continued to show a 59% probability of another 25-basis-point rate cut in December, unchanged from market expectations prior to the minutes’ publication.

The U.S. dollar index (DXY), tracked by the Invesco DB USD Index Bullish Fund ETF , held steady, gaining 0.2% on the day. Meanwhile, Treasury yields saw marginal changes, with the 10-year Treasury yield broadly holding at 4.32%.

The S&P 500 index – tracked by the SPDR S&P 500 ETF Trust ( SPY ) – also held its marginal session gains, up 0.3%.

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Image created using artificial intelligence via Midjourney.