Federal Reserve Minutes comparison — 10 December 2025 vs 28 January 2026
This Federal Reserve minutes comparison covers 10 December 2025 and 28 January 2026. Overall, the newer document was more hawkish. The current document represents a hawkish shift from the prior meeting's easing bias, as the committee opted to hold rates steady despite two dissents favoring a cut, and upgraded the labour market outlook while maintaining caution on inflation. This suggests the easing cycle is on pause, and the next move will depend on incoming data, with the committee likely to cut only if labour market conditions deteriorate or inflation falls more decisively.
What changed
More hawkish. The current document represents a hawkish shift from the prior meeting's easing bias, as the committee opted to hold rates steady despite two dissents favoring a cut, and upgraded the labour market outlook while maintaining caution on inflation. This suggests the easing cycle is on pause, and the next move will depend on incoming data, with the committee likely to cut only if labour market conditions deteriorate or inflation falls more decisively.
- Inflation — Little changed. Inflation is still described as elevated relative to target in both documents, but the current document notes that tariff effects on core goods prices are expected to diminish, suggesting a slightly less hawkish tone overall.
- Labour Market — More hawkish. The prior document highlighted rising unemployment and downside risks, while the current document describes labor market conditions as stabilizing and expects unemployment to decline below its natural rate, indicating a hawkish shift.
- Rate Path — More hawkish. The prior document delivered a rate cut and signaled further conditional easing, whereas the current document held rates steady with a majority supporting no change, marking a hawkish shift to a wait-and-see posture.
- Balance Sheet — Little changed. The balance sheet policy of continuing reserve management purchases (RMPs) remains unchanged between the two documents, with no new signals on the size or pace of purchases.
Key wording
Market participants and respondents to the Open Market Desk's Survey of Market Expectations (Desk survey) generally expected a 25 basis point reduction in the target range for the federal funds rate at the December FOMC meeting, and the modal outlook from the survey as well as from options pricing implied two additional rate cuts next year.
Inflation compensation moved lower over the period, particularly for shorter tenors. The manager attributed the decline in inflation compensation at shorter tenors to lower energy prices as well as a reassessment by some market participants of the likely effect of tariffs on near-term inflation.
The manager noted that the projected fall in reserves in April caused by tax inflows to the Treasury General Account (TGA)—which is a Federal Reserve liability—was particularly large and thus judged that reserves were likely to fall below the ample range if the size of the SOMA portfolio were to remain unchanged.
In light of this projected decline in reserves as well as recent developments in money markets, the manager recommended that the Committee consider starting reserve management purchases (RMPs) this month to maintain an ample level of reserves on an ongoing basis.
With the continued increases in the spreads between money market interest rates and administered rates, as well as some other indicators of tightening money market conditions, participants judged that reserve balances had declined to ample levels. Accordingly, participants assessed that it was appropriate to begin RMPs and initiate purchases of shorter-term Treasury securities to maintain an ample supply of reserves over time.
Policymakers generally emphasized the importance of communicating that RMPs would be made solely to ensure interest rate control and smooth market functioning and had no implications for the stance of monetary policy.
Market-based measures of policy rate expectations indicated one to two 25 basis point rate cuts this year, and the median modal path of the federal funds rate, as given in the Desk survey, continued to indicate expectations of two 25 basis point rate cuts this year.
Near-term inflation compensation continued to decline amid lower-than-expected consumer price index (CPI) readings, lower energy prices, and lower-than-anticipated pass-through of tariffs to customers; forward rates suggested that near-term inflation would stabilize close to current levels for the rest of the year.
Shorter-term Treasury yields were little changed, while longer-term yields rose a few basis points on net; the Treasury curve steepened slightly as a result.
The market-implied expected path of the federal funds rate, nominal Treasury yields, and swap-based measures of inflation compensation were little changed, on net, over the intermeeting period.
The 25 basis point decrease in the target range for the federal funds rate in December quickly passed through to secured and unsecured money market rates.
In an environment of high economic uncertainty, risks around the forecasts for employment and real GDP growth continued to be seen as skewed to the downside. Risks to the inflation projection continued to be viewed as skewed to the upside.
Official documents
Background reading
Related
Earlier meeting · Later meeting · Previous comparison · Next comparison · Methodology
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