Bankinter | Fed minutes reflected a wide division among board members. They correspond to the meeting held on 9-10 December and acknowledge a wide-ranging internal debate regarding the decision to cut rates. A few board members who had supported the cut acknowledged that they could also have supported the option of maintaining rates, given the various risks facing the economy.
Specifically, six of them could have opposed the cut, although only two did so formally. It should be noted that at the meeting, two board members voted against lowering rates (Goolsbee and Schmid) and one voted in favour of a 50bp cut (Miran). In addition, several members suggested that it would be appropriate to maintain rates ‘for some time’ after the recent reductions.
Bankinter analysis team’s view: The minutes show a hawkish tone. Committee members reflected a strong internal debate in a context of above-target inflation (2.7% year-on-year in November) and a lack of economic information. Remember that this decision came in the context of a 43-day US government shutdown. In addition, they seem comfortable with the level of rates for now, following the recent cuts, although there could be further cuts in the future. In our opinion, Powell’s term ends in May and he will be replaced by someone inclined to lower interest rates, as he will be appointed by Trump. We estimate that the Fed will cut rates twice in the first half of the year to 3.00%/3.25% throughout 2026. There could even be an additional cut in the second half of the year.
