FOMC Minutes Analysis: October Meeting, Inflation, and Rate Decisions

Key Takeaways from the October FOMC Meeting

• 📊 Real GDP growth moderated in early 2025, with forecasts predicting modestly stronger expansion through 2028, despite data limitations from a government shutdown.
• ⚠️ Labor market risks were noted as skewed to the downside, while inflation risks were tilted to the upside.

Inflation and Employment Data

• 📈 Both PCE and core PCE inflation stood at 2.8% in September. PCE data increased year-over-year due to tariffs, but core inflation remained unchanged.
• 🌱 Inflation is projected to ease towards 2% after 2026.
• 📉 Employment showed slow job gains and slightly rising, but still low, unemployment.

Federal Funds Rate Decision and Outlook

• ✂️ The committee cut the federal funds rate by 25 basis points, balancing increased downside employment risk against somewhat reduced upside inflation risk.
• 🤔 For the December meeting, opinions were divided, with many participants leaning towards a possible hold, though some still favored a cut conditional on data.
• 🗓️ Many officials indicated it could be appropriate to maintain steady rates for the remainder of 2025.

Balance Sheet Strategy

• 🏦 The committee plans to end balance sheet runoff on December 1st.
• 🔄 They will shift towards a longer-run portfolio with a larger share of Treasury bills for increased flexibility.