Federal Reserve Releases December Meeting Minutes Highlighting Internal Divisions

The Federal Reserve has released the minutes from its December 9–10, 2025, meeting, revealing significant internal divisions among officials. The Federal Open Market Committee (FOMC) voted 9-3 to lower the federal funds rate by a quarter percentage point to a range of 3.5%–3.75%, marking the third consecutive rate cut this year. This decision was the most contentious since 2019, with three dissenting votes: two members preferred to keep rates unchanged due to inflation concerns, while one advocated for a larger half-point cut to address weak employment data.

The minutes indicate that most participants judged that further downward adjustments to the target range for the federal funds rate would likely be appropriate if inflation declined over time as expected. However, some members suggested maintaining the current target range for some time after the recent cut to assess the lagged effects on the labor market and economic activity.

Economic projections from the meeting show a modest upgrade, with GDP growth forecasted at 2.3% for 2026 and slightly lower inflation expectations. The committee anticipates only one more rate cut in 2026.

The minutes also reflect concerns about the labor market, with some officials expressing that progress toward the Committee's 2 percent inflation objective had stalled in 2025 or indicating that they needed more confidence that inflation was being brought down sustainably to the Committee's objective.

Since the meeting, economic reports have shown a labor market where hiring is still slow but layoffs have not accelerated. Inflation has been slowly easing but remains above the Fed's 2% target. The broader economy continues to perform well, with GDP rising at a 4.3% annualized pace in the third quarter, exceeding estimates.

The committee's composition is set to change, with four new regional presidents rotating into voting roles. They are Cleveland President Beth Hammack, Philadelphia President Anna Paulson, Dallas President Lorie Logan, and Minneapolis President Neel Kashkari.

Additionally, the committee voted to resume its bond-buying program, acquiring short-term Treasury bills to calm pressures in short-term funding markets. The Fed initiated the program by purchasing $40 billion a month in bills, maintaining that level for several months before downshifting.