Fed January meeting minutes highlights policy split

The Federal Open Market Committee kept the federal funds rate at 3.50%-3.75% in January, according to Federal Reserve meeting minutes.

Minutes revealed continued concerns about inflation remaining beyond the 2% objective. While tariff-driven core goods inflation is likely to fall later this year, most members cautioned that progress toward the target could be gradual and uneven, with the possibility of chronically high inflation.

On the labor market, policymakers said that conditions appear to be stabilizing after a gradual cooling. Layoffs are low, but hiring is slow, with firms cautious. The downside risks to employment have decreased since the previous meeting.

Members anticipate strong growth in 2026, but expressed considerable uncertainty about the forecast. Most members believe that employment hazards have subsided, whereas inflation risks remain more pronounced. Some warned that reducing rates too fast could jeopardize commitment to the 2% target.