The minutes from the FOMC November meeting revealed that if economic data aligns with expectations, it would likely be appropriate to “move gradually” toward a neutral policy stance over time. However, they stressed that decisions were “not on a preset course” and would depend on the state of the economy and risks to the outlook.

The committee acknowledged the volatility of recent economic data, highlighting the importance of focusing on “underlying economic trends” rather than reacting to short-term fluctuations. Most participants assessed risks to employment and inflation goals as “roughly in balance.”

Participants discussed the delicate balance required in easing policy, weighing the risks of moving “too quickly,” which could hinder inflation progress, against those of moving “too slowly,” which could weaken economic activity and employment.

Some members suggested that a “pause” in policy easing might be warranted if inflation remained “elevated”, while others argued for “accelerating” easing if labor market or economic conditions deteriorate.

Uncertainty over the “neutral” interest rate also played a significant role in shaping the committee’s deliberations. Many participants believed this uncertainty made it prudent to reduce policy restraint “gradually,” ensuring flexibility in responding to future developments.

Full FOMC minutes here.

Minneapolis Fed President Neel Kashkari signaled that a rate cut at the December meeting remains a “reasonable consideration,” reflecting ongoing debates within the central bank. Speaking to Bloomberg TV, Kashkari stated, “Right now, knowing what I know today, still considering a 25-basis-point cut in December—it’s a reasonable debate for us to have.”

Kashkari highlighted that the economy’s resilience in the face of higher interest rates suggests the neutral rate may be higher than previously estimated. This observation raises questions about the effectiveness of current monetary policy in cooling economic demand. He noted that if this resilience persists, it might indicate a structural shift rather than a temporary one.

“This is what I’m trying to understand right now,” Kashkari said, emphasizing the need to assess “how much downward pressure we are putting on the economy, and what is the path for inflation.”

Chicago Fed President Austan Goolsbee has reiterated his support for gradual reduction in the fed funds rate, provided there is no “convincing evidence of overheating” in the economy. He noted that the pace of rate adjustments would depend on evolving economic conditions and the broader outlook.

“The through line to me is pretty clear that we’re on a path, and that path is going to lead to lower rates, closer to what you might call neutral,” Goolsbee emphasized overnight.

Policymakers will assess several key data points ahead of the December meeting. Goolsbee cautioned against drawing firm conclusions from one month’s data. He remarked that inflation is now “not that far above the 2% target”.