Federal Reserve officials were split on the direction that interest rates should go at the Jan. 27-28 Federal Open Market Committee meeting, with some discussing scenarios in which an interest rate hike might be appropriate, according to minutes of it released Wednesday.
“In considering the outlook for monetary policy, several participants commented that further downward adjustments to the target range for the federal funds rate would likely be appropriate if inflation were to decline in line with their expectations,” the meeting summary stated.
NBC News reported that “several” Fed officials thought there was a “possibility that upward adjustments” to interest rates “could be appropriate” should inflation continue to track above 2%, as it has for nearly five years.
Inflation Remains a Concern
Those discussions underscore how inflation continues to be a pressing concern for the Fed, even as public attention remains primarily on the labor market.
CNBC said that meeting participants disagreed on where policy should head, with committee members debating over whether the focus should be more on fighting inflation or supporting the labor market.
“Some participants commented that it would likely be appropriate to hold the policy rate steady for some time as the Committee carefully assesses incoming data, and a number of these participants judged that additional policy easing may not be warranted until there was clear indication that the progress of disinflation was firmly back on track,” the minutes said.
The meeting minutes also suggest that the central bank’s internal conversations remain largely insulated from President Donald Trump’s monthslong pressure campaign to get it to lower borrowing costs.
Powell’s Term Ends in May
The president’s attacks on the central bank and its chair, Jerome Powell, culminated late last year in subpoenas served to the Fed related to its headquarters renovation. Powell’s term as chair ends in May and Trump has picked Kevin Warsh to be his replacement.
Observers say there are few signs of the central bank moving rates in either direction anytime soon, NBC News said.
At the late January meeting, Fed policymakers voted to keep interest rates unchanged, after cutting rates three times at the end of 2025. Meanwhile, the Fed is not expected to cut interest rates again until late summer, if it does at all this year.
The meeting minutes say that at the Jan. 27 and Jan. 28 meeting in Washington, most officials said they thought the risk of the labor market weakening further “had moderated in recent months while the risk of more persistent inflation remained, and some commented that those risks had come into better balance.”
According to NBC News, the balance Fed officials were speaking of is the balance of maintaining a strong labor market while keeping a lid on inflation, preferably as close to the central bank’s 2% target as possible.
The Fed has been trying to steady that balance since the Covid-19 pandemic began in 2020. While inflation has come down significantly since then, it has been on a bumpy ride over the last year, NBC News said.
In April 2025, overall inflation fell to 2.3%, before rising as high as 3% in September.
The post Going Up? What Fed Officials Discussed About Rate Hike Scenarios first appeared on The MortgagePoint.
