Fed: Lower Inflation Before Rate Cuts  02/19 06:00

   Many Federal Reserve officials want to see inflation fall further before 
they would support additional interest rate cuts this year, particularly if the 
job market continues to stabilize, minutes of last month's meeting show.

   WASHINGTON (AP) -- Many Federal Reserve officials want to see inflation fall 
further before they would support additional interest rate cuts this year, 
particularly if the job market continues to stabilize, minutes of last month's 
meeting show.

   The "vast majority" of the 19 participants on the Fed's rate-setting 
committee said that there were signs the job market has stabilized, after the 
unemployment rate rose in late 2025, the minutes said. And most of the 
officials agreed that the Fed's key rate is close to a level that neither 
stimulates nor restrains the economy. The minutes were released Wednesday, 
three weeks after the central bank's Jan. 27-28 meeting.

   Fed officials at that meeting agreed to keep its key rate steady at about 
3.6%, after cutting it three times late last year. Two officials -- Fed 
governors Stephen Miran and Christopher Waller -- voted instead to cut another 
quarter-point.

   The minutes underscored the deeply divided nature of the committee, with 
several camps emerging: "Several" officials said additional cuts will "likely 
be appropriate" if inflation continues to decline. But "some" officials favored 
keeping rates unchanged "for some time," suggesting a longer pause. And several 
other officials said they could have supported language in the statement issued 
after the meeting that would signal the next move by the Fed could be either a 
cut or a rate hike, if inflation remains above their 2% target.

   The support for signaling an openness to a potential rate hike appears to be 
a significant shift from previous meetings. Chair Jerome Powell said after 
meetings last year that the idea of a rate hike wasn't on the table.

   Powell signaled after January's meeting that the Fed could wait for a few 
months before cutting rates again. He said at a news conference that the 
economy and hiring had improved since the central bank had previously met in 
December, and added that the Fed was "well positioned" to evaluate how the 
economy evolves in the coming months before making any further moves.

   The decision to keep rates unchanged defied a stream of demands from 
President Donald Trump for the Fed to reduce its key rate to as low as 1%, a 
level few economists endorse. When the Fed cuts its key rate, it can over time 
lower borrowing costs for mortgages, auto loans, and business loans, though 
those rates are also influenced by financial markets.

   The minutes said that the "vast majority" of the 19-person committee agreed 
that the risks of job losses and a worsening labor market had diminished, 
likely a key reason that they voted to keep rates unchanged. The Fed typically 
cuts rates to boost spending, growth, and hiring.

   Figures released last week suggest the Fed will be unlikely to cut anytime 
soon. Inflation remains elevated, according to the Fed's preferred measure, and 
January's jobs report showed that hiring picked up last month. Those trends 
support those Fed officials who argue that the economy doesn't need further 
rate cuts.

   Consumer prices grew 2.4% in January compared with a year earlier, the 
government said last week, not too far from the Fed's 2% target.

   But the Fed focuses on a different measure of inflation, which is running 
higher. When the latest figure is released Friday, it is expected to have 
increased roughly 3% from a year earlier. The Fed's preferred measure puts much 
less weight on housing and apartment rental costs, which have cooled 
considerably, and as a result it is running above the better-known consumer 
price index.

   Also last week, the government said that hiring improved in January, with 
employers adding 130,000 jobs, the biggest gain in just over a year, while the 
unemployment rate slipped to a low 4.3%, down from 4.4%.

   Fed Governor Michael Barr on Tuesday pointed to the jobs report as evidence 
that the labor market is "stabilizing," while inflation remains above 2%.

   "Based on current conditions and the data in hand, it will likely be 
appropriate to hold rates steady for some time," Barr said.

   Separately, Austan Goolsbee, the president of the Federal Reserve Bank of 
Chicago, told CNBC Tuesday that the Fed could reduce rates "several more" times 
this year, if there is evidence that inflation was moving closer to 2%.