Federal Reserve officials broadly supported leaving the benchmark interest rate unchanged at their late January meeting, but newly released minutes show pronounced differences within the committee regarding future monetary moves.
While the majority noted improved economic conditions following three-quarters of a percentage point in recent rate reductions, some policymakers signaled a readiness to raise rates again in the future if inflation fails to align with the central bank’s 2% objective.
Despite expectations among investors—reflected in the CME FedWatch tool that points to a possible rate cut in June—several members of the Federal Open Market Committee (FOMC) expressed concerns that prices could remain stubbornly high. Some participants maintained a hawkish stance, emphasizing that additional tightening could be necessary should inflation persist above target.
A new element shaping policy discussions is the role of artificial intelligence. According to meeting records, a number of officials predicted that advances in AI could boost productivity and help restrain inflationary pressures. However, other members warned rapid adoption of AI technologies could raise financial stability concerns, citing elevated asset values and limited transparency in private markets. Most committee participants remain cautious, indicating that the journey toward price stability could be longer and less predictable than current market pricing suggests.
These internal disagreements come as the U.S. central bank prepares for leadership change. With Jerome Powell’s tenure ending in May and amid an ongoing review of his leadership, President Donald Trump has nominated Kevin Warsh, a former Fed governor, as his successor. Should Warsh be confirmed, he is set to oversee his first FOMC meeting in mid-June—a gathering for which investors are bracing for potential monetary easing favored by the current administration.
Latest economic figures have yet to close these divisions. Data from January reflect slowing consumer price increases, but the labor market remains strong with declining joblessness. Federal Reserve officials continue to focus on the Personal Consumption Expenditures (PCE) price index as their preferred inflation gauge, as it offers a more comprehensive view of household expenses than CPI. The next PCE report is scheduled for Friday, with updated economic forecasts due at the committee’s March session.
