The minutes of the January Federal Reserve meeting are "hawkish", officials are cautious about further interest rate cuts.

The latest released meeting minutes showed that Federal Reserve officials were unexpectedly cautious about cutting interest rates at the January policy meeting, with some even warning that if inflation continues to remain high, there is a possibility of future rate hikes. According to the minutes of the January 27-28 policy meeting released on Wednesday, while most officials did not explicitly discuss raising rates, the Federal Reserve is gradually tilting towards a more hawkish policy stance. U.S. President Trump has repeatedly stated publicly that he hopes the next Fed chair will push for lower interest rates. Just two days after the meeting, on January 30, Trump announced his nomination of Warsh, a former Fed governor, to take over as chair after Powell's term ends in May. Gregory Daco, Chief Economist at EY-Parthenon, pointed out in a report to clients that the meeting minutes "clearly have a more hawkish tone," and stated that if Warsh is ultimately confirmed as Fed chair, the future policy battles will be more interesting. The minutes showed that most members of the Federal Open Market Committee (FOMC) believe that signs of weakness in the labor market that led the Fed to cut interest rates three times by the end of 2025 had significantly eased by late January. "The vast majority of participants assessed that the downside risks to employment had diminished in recent months, while risks of persistently high inflation remained." It is worth noting that this assessment was made before the strong January jobs report was released. At the same time, some officials took a firmer stance on further easing policies at the meeting. The minutes noted, "Several participants warned that further easing under conditions of persistently high inflation could be misinterpreted by markets as a weakening of the Committee's commitment to the 2% inflation target." However, "several officials" expressed openness to further rate cuts if inflation falls as expected, but most believed that the improvement in inflation may be slower than previously anticipated. At the January meeting, the FOMC voted to keep the federal funds rate target range unchanged at 3.5% to 3.75% with a vote of 10 in favor and 2 against. Directors Christopher Waller and Stephen Milan voted against, advocating for a 25 basis point rate cut. Unlike the previous three statements, the statement this time did not mention the rise in risks of downside risks to employment. Data improvement strengthens the wait-and-see stance Since the January meeting, the overall economic data released has pointed to faster economic growth, slowing inflation, and a stabilizing labor market. Data from the U.S. Bureau of Labor Statistics showed that the January Consumer Price Index (CPI) rose moderately, mainly subdued by the decline in energy prices, with the core CPI excluding food and energy prices rising in line with market expectations. In terms of employment, nonfarm payrolls in January saw the largest increase in over a year, adding 130,000 new jobs, and the unemployment rate unexpectedly dropped to 4.3%, indicating continued stabilization in the labor market in early 2026. In this context, several Fed officials have reiterated recently that the overall stable U.S. economy provides room for patience in adjusting the interest rate trajectory. However, Trump and his administration officials continue to call for the Fed to cut rates quickly. On the market side, traders have lowered their expectations for the timing of the next Fed rate cut this year, but federal funds rate futures still show that the possibility of a rate cut in June remains.