In the early hours of February 19 Beijing time, the minutes of the Federal Reserve’s monetary policy meeting showed that several participants stated that further rate cuts would likely be appropriate if inflation declines as expected. Some policymakers remained cautious about additional rate cuts. Notably, the minutes mentioned for the first time that some officials had discussed the possibility of raising interest rates, exposing deep divisions within the Fed’s leadership over the future path of interest rates.

 

In the market, the three major U.S. stock indices rose sharply across the board overnight. The Nasdaq surged more than 1.4% during the session, and the S&P 500 rose nearly 1%. At the close, the Dow gained 0.26%, the S&P 500 0.56%, and the Nasdaq 0.78%. Large-cap U.S. tech stocks rose broadly: NVIDIA and Amazon climbed more than 1%, while Apple, Google, Microsoft, Meta, Tesla, and Broadcom all closed slightly higher. Memory chip stocks strengthened across the board, with Micron Technology jumping more than 5% and Western Digital rising over 4%.

 

 

On February 18 U.S. Eastern Time, the Federal Reserve released the minutes of its January monetary policy meeting, which revealed significant disagreement over the rate path inside the Fed. Three possibilities were raised: rate cuts, pausing cuts, and rate hikes.

 

At the January meeting, some participants argued that further rate cuts could be appropriate if inflation falls as expected.

 

In sharp contrast, a few participants suggested that the possibility of resuming rate hikes should not be ruled out, and wanted the post-meeting statement to more clearly reflect that “rate decisions are two-sided.” This wording signals a clear rise in Fed officials’ concerns over sticky inflation.

 

Most participants warned that the process of inflation returning to 2% could be “slower and more uneven” than widely expected. The vast majority judged that downside risks to employment had eased in recent months, but risks of more persistent inflation remained.

 

Previously, at its January 27–28 meeting, the Fed decided to pause rate cuts. Of the 12 voting members, two dissented: Fed Governor Waller and Trump-appointed Governor Milan, both supporting an additional 25-basis-point rate cut.

 

The newly released minutes showed that when discussing the policy outlook in January, some policymakers were cautious about further rate cuts, at least in the near term.

 

“Some participants warned that further easing of monetary policy amid high inflation data could be misinterpreted as a weakening of policymakers’ commitment to the 2% inflation target,” the minutes stated.

 

Other officials, however, believed that further rate cuts remained possible if inflation declines as expected.

 

Charlie Ripley of Allianz Investment Management commented: “From our perspective, the minutes support our view that a Fed rate cut is unlikely in the foreseeable future.”

 

Nick Timiraos, known as the “Fed mouthpiece,” noted that officials had grown less concerned about the labor market and more worried about inflation, describing above-target inflation as “a significant risk.”

 

 

Recent data show that overall U.S. inflation has fallen sharply from its 2022 peak but remains above the Fed’s 2% target.

 

According to the minutes, Fed officials generally believed that elevated inflation readings largely reflected core goods inflation, which appeared to be driven by tariff hikes.

 

Regarding the inflation outlook, officials expected inflation to move down toward 2%, but the pace and timing remain uncertain. Tariff effects on core goods prices may begin to fade this year.

 

Most participants warned that progress toward the 2% goal could be slower and more uneven than widely expected, and that the risk of sustained above-target inflation should not be ignored. Some also argued that persistent demand pressure could keep inflation high.

 

On the labor market, Fed officials observed that the U.S. unemployment rate has been roughly flat in recent months, while job growth has remained low. Most noted that recent readings on unemployment, layoffs, and job openings suggest the labor market may be stabilizing after a period of gradual cooling.

 

The vast majority of officials judged that the U.S. labor market has shown signs of stabilization, and downside risks to the labor market have diminished.

 

However, some participants pointed out that even as the labor market stabilizes, several indicators — including survey measures of job availability and the share of people working part-time for economic reasons — still point to softening conditions. Most also noted that downside risks to the labor market remain.

 

Data released since the late-January meeting show that U.S. January CPI growth came in below market expectations. January non-farm payrolls rose by 130,000, the largest increase in more than a year, while the unemployment rate unexpectedly fell to 4.3%, indicating continued labor market stabilization early in the year.

 

Market trading data show investors have pushed back expectations for the next Fed rate cut, but futures pricing still suggests traders see a chance of a cut before June.

 

According to the CME FedWatch Tool as of press time: