WASHINGTON—When the Federal Reserve met to cut interest rates this month, some officials said they were reluctant to support more easing in the near future, according to minutes of the meeting published Tuesday—a sign that further cuts could face resistance at the next meeting in January.
The written record of the Fed’s December meeting, released after the customary three-week delay, showed that most members of the Fed’s policy committee thought that rates could eventually fall further if inflation declines. The Fed cut rates at three straight meetings to end 2025 as it sought to cushion a weaker labor market.
Cuts have become an increasingly close call because price increases have been more persistent than the Fed would like, the minutes indicated. Data released after the Fed’s meeting indicated inflation cooled in November—but economists have said that the recent government shutdown may have distorted those numbers.
Most Fed policymakers backed this month’s rate cut, but some of those officials “indicated that the decision was finely balanced or that they could have supported keeping the target rate unchanged,” the minutes said. Other officials opposed December’s rate cut, expressing concern that the Fed’s efforts to get inflation back to the 2% target had stalled this year, the minutes said.
The minutes underscored deepening divisions within the Fed, especially in the most recent vote which drew three dissents—two from officials against any cut and one from a Trump ally who favored a larger cut.
Looking ahead, some officials suggested that “it would likely be appropriate to keep the target range unchanged for some time,” the minutes said.
Since the meeting, more economic data have been released showing that strong consumer spending has helped fuel robust economic growth—even as unemployment has inched higher. New data scheduled to be released next month could reshape the thinking of Fed officials heading into their next meeting in late January.
The Fed held interest rates steady at elevated levels for most of 2025 to address a stubborn pace of rising prices. A subsequent cooling in the labor market prompted three straight quarter-point rate cuts between September and December, moves aimed at averting a deeper slowdown.
To many economists, the job market still looks fragile as the calendar turns, with sluggish hiring and the unemployment rate rising this year to 4.6%. Yet lingering inflation, and the rate cuts already in the rearview, may force the Fed to move more cautiously if it decides to continue easing in 2026.
At 3.5% to 3.75%, the Fed’s targeted interest-rate range is now lower than it has been in three years, and a vocal group of Fed officials is wary of lowering it further while inflation remains somewhat above target. Each of the fall’s three rate cuts faced successively greater internal resistance.
In the forward-looking “dot plot” published earlier this month, the median Fed official projected just one more rate cut in all of 2026, although the outlook varied widely among the 19 officials who submitted forecasts. At this point, the central bank is moving into fine-tuning phase and may want to make any further cuts at a slower pace, said Patrick Harker, a former president of the Philadelphia Fed.
“You don’t know exactly where the destination is, so you don’t want to go slamming into the wall,” he said.
Economic data published since the December meeting have mostly looked reassuring, although delays and technical challenges caused by the recent government shutdown have undercut the data’s value to policymakers. In particular, economists have second-guessed numbers showing that consumer inflation dropped to 2.7% in November, warning that quirks in how government statisticians handled missing October figures made recent price increases look milder than they were in reality.
Other recent reports showed that the economy grew at a better-than-expected 4.3% annualized rate in the three months through September, and that while unemployment has edged higher, hiring hasn’t collapsed.
In recent speeches and projections, some Fed officials have said they see a decent path ahead for the economy in 2026, with business-friendly tax changes and less uncertainty over President Trump’s volatile trade policy likely to spur solid growth and a modest decline in the unemployment rate.
In that light, it might take bad news in the December jobs report—due Jan. 9—to push Fed officials toward a fourth straight rate cut at their next meeting on Jan. 27–28, said Matthew Luzzetti, chief U.S. economist at Deutsche Bank. For now, bets in interest-rates futures show that traders mostly think the Fed will hold rates steady in January.
Hanging over the central bank’s deliberations is Trump’s search for a successor to Chair Jerome Powell, whose term at the Fed’s helm ends in May. Trump has interviewed several finalists for the role in recent weeks, a process that has drawn scrutiny over Trump’s demands that his chosen candidate align with the president’s insistence on lower interest rates.
Write to Matt Grossman at matt.grossman@wsj.com