Officials at the Federal Reserve signaled no rush to restart interest rate cuts after pausing reductions last month, according to minutes from January’s meeting. In fact, several policymakers even went so far as to raise the possibility of rate increases if inflation stayed stubbornly high.
The record of the latest gathering, released on Wednesday, underscored the sharp divisions that have plagued the central bank as it contends with a mixed economic picture after a series of rate reductions last year.
Several policymakers indicated that there was still a path to lower rates this year if inflation declined as expected, while a larger group signaled support to hold rates steady until there was “clear indication that the progress of disinflation was firmly back on track.”
The minutes showed that several policymakers wanted the Fed to convey “the possibility that upward adjustments to the target range for the federal funds rate could be appropriate if inflation remains at above-target levels.”
January’s meeting marked the first gathering since July at which the Fed held rates steady, voting 10-2 to maintain the previous 3.5 percent to 3.75 percent level. Two governors, Christopher J. Waller and Stephen I. Miran, dissented in favor of a quarter-point cut, arguing that the labor market was vulnerable without additional support from the central bank.
The decision to pause came after three consecutive contentious meetings at which officials splintered over how to contend with a slowing labor market and intensifying inflationary pressures caused by President Trump’s tariffs.
The Fed, prompted by growing concerns about rising unemployment, lowered rates between September and December by a cumulative 0.75 percentage point, although those decisions featured dissents in both directions. Some officials wanted the Fed to cut even faster, while others voted for the Fed to stay on hold.
While January’s vote was not unanimous, it appeared less divisive than those earlier decisions. Officials appeared much more comfortable with maintaining the previous policy settings, citing a more upbeat economic backdrop, according to the minutes.
The vast majority of officials concluded that the risks posed to the labor market had diminished and that consumer spending remained “resilient.” They broadly forecast “solid” growth in 2026.
That echoed the message Jerome H. Powell, the Fed chair, sent at the news conference after last month’s meeting, at which he remarked on the resilience of the economy and noted that the jobs market appeared to be stabilizing.
“The economy has once again surprised us with its strength, not for the first time,” Mr. Powell told reporters.
In a separate exchange, he said that the Fed was “not trying to articulate a test for when to next cut, or whether to cut at the next meeting,” in reference to the central bank’s gathering on March 17-18. “We’re well positioned,” Mr. Powell said, stressing that the Fed would be making decisions meeting by meeting. When asked at the meeting, Mr. Powell said that rate increases were not “anybody’s base case.”
Mr. Powell’s term as chair ends in May, giving him two more meetings at the helm. Mr. Powell could stay on as a member of the board of governors until 2028. He has not disclosed his plans yet. Mr. Trump said last month that Kevin M. Warsh, a former Fed governor, would replace Mr. Powell.
If confirmed by the Senate, Mr. Warsh’s first meeting as chair would be in June. Financial markets tracking expectations for rate cuts expect Mr. Warsh to usher in cuts but the timing has fluctuated after recent data showed the labor market steadying.
Rate decisions are made by a 12-person policy-setting committee that includes all members of the board of governors, the president of the Federal Reserve Bank of New York and a rotating set of four presidents from the other 11 regional banks.
Officials have signaled that as long as the labor market stays intact, the bar for further cuts is high. Policymakers and economists across Wall Street expect relatively steady growth in 2026, raising some concerns that inflation will remain sticky even as many officials expect tariff-related price pressures to ease at some point this year.
Recent research by economists at the Federal Reserve Bank of New York suggested that, through November 2025, 90 percent of the economic burden of the president’s tariffs fell on U.S. companies and consumers. The study drew a sharp rebuke from Kevin A. Hassett, Mr. Trump’s top economic adviser, who on Wednesday said it was the “worst paper I’ve ever seen in the history of the Federal Reserve system,” and called for the authors to be “disciplined.”
Mr. Hassett’s criticism is just the latest in a string of attacks on the central bank from the administration, which is seeking much lower rates than the Fed has so far been willing to deliver.
One concern that Fed officials harbor is that cutting again too soon or by too much would undermine their grip on inflation. Most officials, according to the minutes, worried that progress in bringing down inflation “might be slower and more uneven than generally expected.” They also described the risk that inflation may persistently exceed the Fed’s 2 percent target as “meaningful.”
Inflation, as measured by the Consumer Price Index report, came in unexpectedly muted in January, according to data released last week. But estimates for the metric more closely watched by the Fed — the Personal Consumption Expenditures Price Index — point to a re-acceleration in the coming months that could push back expectations for the Fed’s next cut.
Colby Smith covers the Federal Reserve and the U.S. economy for The Times.
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