The Fed is afraid that tariffs will affect inflation and shout 'easing interest rates', the Fed may slow down or suspend the reduction of the balance sheet.

Federal Reserve minutes released on Wednesday from the January meeting showed that Fed policymakers expressed concerns about the impact of Trump's tariff policy on inflation and tended to take a wait-and-see attitude, believing that more evidence of a slowdown in inflation is needed before further rate cuts. (Background: Trump's chief economic advisor 'regularly concerned' about Fed Chairman Powell, increasing pressure on Fed to cut rates?) (Background: CPI broke through》10-year US bond yields surged 4.66% to the largest increase of the year, will the Fed only cut rates once this year?) According to the minutes of the January meeting released by the Fed on Wednesday, Fed officials unanimously agreed that further rate cuts would only be considered after seeing inflation further decline, while expressing concerns about the impact of Trump's tariff policy on inflation. Concerns over tariff impact on inflation may delay rate cuts Federal Open Market Committee (FOMC) policymakers at the January meeting unanimously decided to keep the Benchmark interest rate unchanged, the decision was made after three consecutive rate cuts in 2024, totaling 1% in cuts. CNBC reported that when making this decision, officials discussed the possible impact of Trump's new government, including tariffs, reduced regulation, and tax cuts, and believed that current monetary policy is 'significantly less restrictive' than before the rate cuts, giving officials time to assess the economic situation before further action. Meeting members pointed out that current policies provide 'time to assess changes in economic activity, the labor market, and inflation,' and most still believe that the current policy stance remains tight, hoping to see further decline in inflation before considering additional adjustments to the federal funds rate target range. Fed officials expressed concerns that policy changes could keep inflation above the Fed's target, FOMC members mentioned 'potential impacts of trade and immigration policy changes and strong consumer demand,' indicating that businesses in multiple regions may pass on to consumers the costs increased due to rising tariffs. Fed Chairman Powell usually avoids speculating too much on the impact of tariffs, but other officials have expressed concerns and admitted that Trump's policies could affect Fed decisions, thereby delaying rate cuts, according to CME FedWatch data, the market currently expects the Fed to cut rates in July or September. Considering slowing down or pausing balance sheet reduction Nick Timiraos, a reporter for the Wall Street Journal known as a Fed megaphone, said that the January meeting minutes showed that officials discussed at last month's meeting whether to slow down or pause the reduction of its nearly $6.8 trillion asset portfolio because in the coming months they will face a complex situation due to the need to raise the federal debt ceiling. Timiraos pointed out that dynamics related to the debt ceiling could lead to significant fluctuations in the Fed's liabilities (i.e., reserves), and the balance sheet reduction process could ultimately deplete the banking system's reserves, with Fed officials unsure how long this process will last, and how the Treasury will manage currency market fluctuations caused by its cash balance, which could make it difficult for the Fed to determine the correct reserve balance. Therefore, according to the meeting minutes, officials at the January meeting believed that 'considering a pause or slowdown in balance sheet reduction until the debt ceiling issue is resolved may be appropriate.' Related reports Former US Treasury Secretary Summers warns: uncontrolled inflation may erupt again, this round of Fed rate cuts may have ended Fed stops cutting rates? Fed officials shout 'strong employment, inflation close to 2%' has reached neutral interest rates Fed megaphone shouts 'inflation easing'; market expects Fed to cut rates as early as June (Fed is afraid of tariff impact on inflation shouting 'slow rate cuts', Fed megaphone: balance sheet reduction may slow down or pause) This article was first published on BlockTempo, the most influential Blockchain news media in the dynamic Block sector.