The Federal Reserve (Fed) has predicted that inflation will continue to slow in 2025, albeit at a slower pace than originally anticipated, with new concerns over policies proposed by the incoming Trump administration, as expressed in the latest Federal Open Market Committee (FOMC) minutes for its meeting on December 17 – 18.
In the discussion that decided the committee’s recent 25-point interest rate cut, members discussed the state of the economy and inflation in 2024, looking ahead to 2025.
The committee felt that there was a definite ease in inflation through 2024, meriting the beginning of its rate cuts in September. However, the rate at which inflation has lessened was slower by the end of the year than the committee had predicted due to some upward shifts in data, ending the year a little higher than expected.
Due to this, committee members are now expecting 2025 to see a less aggressive reduction in inflation throughout the year, similar to 2024’s trajectory. Specifically, members called out some incoming policy changes and their possible effects as a new president takes the stage this year.
“With regard to the outlook for inflation, participants expected that inflation would continue to move toward 2%, although they noted that recent higher-than-expected readings on inflation, and the effects of potential changes in trade and immigration policy, suggested that the process could take longer than previously anticipated,” the minutes stated.
As of now, the Fed has maintained its previous November prediction that inflation will “decline to 2% by 2027.”
In terms of rate cuts in 2025, committee members have anticipated that rate cuts will slow for the year, possibly only reaching 75 points cut in total by the end of the year.
For the full meeting minutes, click here.
