Federal Reserve officials expressed concerns about the potential risks of lowering interest rates too quickly, according to MarketWatch’s report on the minutes from their late January policy meeting. The Fed maintained a range of 5.25% to 5.50% for the federal funds rate at that meeting, as expected.
The minutes revealed that participants believed the current policy rate was likely at its peak for this tightening cycle and acknowledged that reducing it would not be appropriate until there is more confidence in inflation reaching 2%. While progress has been made over the past six months, there is still caution towards inflation and uncertainty surrounding how long a restrictive policy stance should be maintained.
MarketWatch also reported on traders’ expectations in derivative markets as of late February: a 30% chance of an interest rate cut in May and an even higher likelihood (80%) in June. This projection includes four quarter-point cuts by year-end, down from six prior to January’s meeting.
Overall, caution prevails among Federal Reserve officials when it comes to making any hasty decisions regarding interest rates.
