Fed Governor Adriana Kugler said overnight that it’s “appropriate to hold the federal funds rate in place for some time”, citing the current balance of risks in the economy.

Kugler acknowledged that inflation still has “some way to go” before reaching 2% target. She highlighted that while the labor market remains strong and risks of a downturn have eased, “upside risks to inflation remain.”

Regarding the potential impact of new tariffs, Kugler stated that while they could contribute to higher prices, the extent of their effect remains uncertain. She emphasized that policymakers will need to “wait” for more data to assess how trade policy shifts might influence inflation and broader economic conditions.

St. Louis Fed President Alberto Musalem raised concerns overnight about inflation expectations becoming “unanchored”, emphasizing that the risk is higher when the economy is running without slack and after a period of elevated inflation.

Musalem pointed out that market and survey data show a notable rise in near-term inflation expectations over the past three months, reinforcing worries that inflation might remain above the Fed’s 2% target for longer than anticipated.

He warned that if inflation remains stuck at elevated levels or expectations continue to rise, “a more restrictive path of monetary policy relative to the baseline path might be appropriate.”

Atlanta Fed President Raphael Bostic noted his baseline expectation for two 25bps rate cuts later this year, but cautioned that “the uncertainty around that is pretty significant”, with multiple factors that could shift the outlook in either direction.

He acknowledged growing concerns from businesses regarding the potential impact of new tariffs, immigration policies, and regulatory changes on economic conditions.

He noted that there is both enthusiasm and “widespread apprehension” among business contacts regarding these policy shifts. Specifically, he warned that tariffs could push up costs, adding, “Many feel confident that if that happens, then they can pass along higher costs in their prices.”

Fed Vice Chairman Philip Jefferson said in a speech overnight that the central bank can “take our time” in assessing economic data before making any changes. With the U.S. economy performing well and the labor market remaining solid, Jefferson indicated that there is no immediate urgency to ease policy further.

He acknowledged that progress toward the Fed’s 2% inflation target “has been slow in the past year.” He added that the path of inflation will likely remain “bumpy”.

While the 100 basis points of cumulative rate cuts last year have moved policy closer to a neutral stance, he reiterated that monetary policy is still “restrictive”.

Full speech of Fed’s Jefferson here.

Atlanta Fed President Raphael Bostic reiterated in an interview that rate cuts remain a possibility this year, but emphasized the need for further data clarity before making any decisions.

He maintained a neutral stance, stating, “I am not taking anything off the table. I am not putting anything extra on the table.”

Bostic acknowledged that January’s hotter-than-expected inflation data raised questions about whether it represents “a new trend or just a bump in the road”. He will be closely analyzing economic developments “over the next several months” to determine the correct policy response.

Bostic also defended Fed’s current position, insisting, “I don’t think we have cut too much. We are still in a restrictive posture and that’s what we need.” He reaffirmed that monetary policy remains tight enough to bring inflation down, arguing that waiting until inflation fully reaches 2% before easing would have been a mistake.

FOMC’s January meeting minutes reinforced Fed’s cautious stance, with policymakers emphasizing the need for “further progress on inflation” before considering any rate cuts. The officials acknowledged a “high degree of uncertainty” in the economic outlook, justifying a “careful approach” to policy adjustments.

While Fed remains confident that inflation will ease in the coming months, officials largely pointed to “upside risks to the inflation outlook”, rather than concerns over the job market.

he minutes highlighted several factors that could disrupt the disinflation process, including shifts in trade and immigration policy, geopolitical disruptions to supply chains, and stronger-than-expected household spending. These risks suggest that inflationary pressures could remain stickier than anticipated, keeping the Fed on hold for longer.

Full FOMC minutes here.