The Federal Reserve cut rates by a quarter percentage point on December 10, but beneath the surface, the official meeting minutes reveal a sharply divided committee.
The FOMC is wrestling with a troubling concern: inflation could become permanently stuck above the Fed’s 2% target.
The 9-to-3 dissent vote exposes the real source of tension within the central bank, not jobs or growth, but the stubborn refusal of prices to fall.
Three officials voted against the rate cut, with two wanting to hold rates steady entirely.
Their message was blunt: cutting rates now, while inflation remains elevated, could dangerously signal the Fed is softening its commitment to controlling prices.
The dissent breakdown: What each group feared
The vote split tells a revealing story about the Fed’s internal battle over priorities.
Two officials, Austan Goolsbee and Jeffrey Schmid, wanted to pause rate cuts and keep policy unchanged.
They worried that inflation had “been above target for some time” and showed no signs of moving closer to the 2% goal over the entire past year.
For them, cutting rates while prices remain elevated felt backwards, like abandoning inflation-fighting at the worst possible moment.
A third dissenter, Stephen Miran, actually pushed in the opposite direction.
He wanted a bigger cut of half a percentage point, seeing faster progress on jobs as the priority.
But even his more dovish stance reflected deeper anxiety about the economy’s fragility.
Here’s the critical point that matters for markets: the two officials who opposed any cut were primarily motivated by inflation concerns, not labor market worries.
This is striking because the Fed’s public messaging emphasized jobs.
The minutes reveal that “progress toward the 2% inflation objective had stalled” in 2025.
When the largest central bank in the world acknowledges that its inflation-fighting efforts are treading water, that’s a warning signal.
Officials noted that if inflation remained above target for longer periods, it could actually “risk an increase in longer-run inflation expectations,” meaning Americans and businesses might stop believing the Fed will ever bring prices back down.
The phrase that haunted the discussion was “entrenched inflation.”
Several committee members warned directly that “higher inflation becoming entrenched” posed a genuine threat.
Entrenched means it becomes locked into behavior, workers demand higher wages, businesses raise prices preemptively, and the entire economy shifts into a higher-inflation mode that becomes much harder to break.
Tariffs and persistent pressures
The dissent makes more sense when you look at what’s actually driving inflation.
The minutes show that officials “expressed uncertainty about when these effects would diminish” on tariffs and “the extent to which tariffs would ultimately be passed through to final goods prices”.
Core goods prices have already picked up noticeably, and the Fed staff directly attributed much of this to tariffs.
But here’s what kept officials nervous: some participants reported that their business contacts had mentioned “persistent input cost pressures unrelated to tariffs”.
Even without trade policy headwinds, companies are still struggling with rising costs. That’s a separate, structural problem the Fed can’t easily fix with interest rate moves.
The uncertainty cuts both ways.
Some officials believed tariff effects would fade, reducing upside inflation risks. But others weren’t convinced.
The honest truth buried in these minutes is that the Fed doesn’t have clear visibility into when inflation will genuinely fall back to target.
That uncertainty explains why officials are moving cautiously.
The committee signaled it’s “not on a preset course,” meaning they won’t mechanically cut rates every month.
Each decision will depend on fresh data about whether inflation is actually moving toward 2%.
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