Did the Federal Reserve's meeting minutes show a "hawkish" stance? There is widespread support for a cautious approach to future interest rate cuts

According to the Zhitong Finance APP, on Wednesday, the minutes from the Federal Reserve's November meeting showed that Fed officials generally support a cautious approach to future interest rate cuts, due to the continued robust performance of the U.S. economy and the slow progress in easing inflation.

The minutes mentioned: "Participants expect that if economic data aligns with expectations, inflation continues to decline towards the 2% target, and the economy remains close to maximum employment levels, then a gradual shift towards a more neutral policy stance would be appropriate."

Recent Policy Review and Outlook

At the meeting concluded on November 7, the Federal Reserve announced a 0.25 percentage point reduction in the benchmark interest rate to a range of 4.5%-4.75%. This decision was made following a significant rate cut of 0.5 percentage points in September. Fed Chairman Jerome Powell previously stated that the current economic conditions do not indicate a need for urgent further rate cuts.

The Federal Reserve will hold its last policy meeting of the year on December 17-18. Some officials suggested during the November meeting that if inflation remains high, the Fed may pause rate cuts and maintain borrowing costs at restrictive levels. However, if the economy or job market deteriorates, the pace of rate cuts may accelerate.

Uncertainty of Neutral Interest Rate

Officials also pointed out that the lack of a clear assessment of the so-called "neutral interest rate" (the rate level that neither restricts nor stimulates economic growth) is one of the reasons for their cautious stance. The minutes indicated that many officials believe this uncertainty "complicates the assessment of the restrictiveness of monetary policy" and that "gradually reducing policy constraints is appropriate."

Despite the Fed's upward revisions of the neutral interest rate estimates over the past year, the exact distance of the current policy rate from a neutral stance remains unclear.

Additionally, the minutes revealed that Fed officials are considering a "technical adjustment" to the overnight reverse repurchase rate, which has some impact on the overall borrowing costs in the economy.

Employment Market and Inflation Dynamics

The minutes noted that participants believe the downside risks to employment and economic growth "have somewhat diminished." Overall, there are no signs of "rapid deterioration" in the job market. Although October's employment data was affected by hurricanes and a major strike, the overall job market remains robust, with low unemployment rates and limited layoffs.

Regarding inflation, officials pointed out that price growth has significantly retreated from its peak, but core inflation (excluding food and energy) remains "slightly elevated." The minutes mentioned that participants are confident that inflation is making sustainable progress towards the 2% target, although a few officials indicated that this process may take longer than previously expected.

Recent solid inflation data and the cautious statements from Fed officials have led investors to lower their expectations for another rate cut in December.

Economic and Policy Risks

Before the November Federal Reserve meeting, Trump had just been re-elected as president. Trump proposed new tariffs, tax cuts, and large-scale deportation policies. Economists suggest that these policies could exert upward pressure on inflation.

Overall, despite the stable performance of the job market and easing inflation, Fed officials remain cautious about future policy adjustments, emphasizing a gradual approach based on actual economic data performance