Federal Reserve officials in December adopted a new stance on rate-cutting amid elevated inflation risks, deciding to move more slowly in the months ahead.

“Participants indicated that the committee was at or near the point at which it would be appropriate to slow the pace of policy easing,” minutes from the Federal Open Market Committee’s Dec. 17-18 gathering showed. “Many participants suggested that a variety of factors underlined the need for a careful approach to monetary policy decisions over coming quarters.”

They cited higher inflation readings, continued strength in spending, and reduced downside risks to the outlook for the labor market and economic activity, the minutes, released Wednesday in Washington said. US central bankers cut their benchmark lending rate by a quarter-point at that meeting to a range of 4.25% to 4.5%.

The Fed’s staff incorporated “placeholder assumptions” about potential policy changes under incoming US President Donald Trump, resulting in an economic growth forecast that was slightly slower, with inflation also expected to remain firm.

The minutes showed “a number” of policymakers indicated they also included placeholder assumptions in their updated economic projections. “Almost all participants judged that upside risks to the inflation outlook had increased,” the minutes said.

Officials expected the US jobs market to remain solid. However, they “generally noted that labor market indicators merited close monitoring.”

The next monthly employment report from the Bureau of Labor Statistics is due Friday.

The December move marked a full percentage point in reductions since September. The rapid pace produced a dissenting vote in September and another in December – each a rarity under Chair Jerome Powell.

Powell said in his post-meeting press conference the December cut was a “closer call” than previous reductions.

“Some participants stated that there was merit in keeping the target range for the federal funds rate unchanged,” the minutes said. “A majority of participants noted that their judgments about this meeting’s appropriate policy action had been finely balanced.”

Cleveland Fed President Beth Hammack dissented, preferring to hold rates steady, and updated forecasts showed three other officials agreed. Governor Michelle Bowman voted against the half-point cut in September, preferring a smaller reduction.

Read More: Powell Says Future Cuts Would Require Fresh Inflation Progress

New forecasts released after the December meeting showed a median estimate of two rate cuts in 2025, down from the four policymakers projected in September. The change reflected renewed worries on the committee about upside risks to inflation.

Uncertainties
The Fed’s favored inflation gauge, the personal consumption expenditures price index, rose 2.4% in the year through November, and 2.8% minus food and energy. Fed officials since the meeting have signaled they are in no hurry to cut rates and want to see more evidence that price increases are settling down.

“Since September, the labor market has been somewhat more resilient, while inflation has been stickier than I assumed at that time,” Fed Governor Lisa Cook said Monday. “Thus, I think we can afford to proceed more cautiously with further cuts.”

The Fed will also face an array of new policies from the incoming Trump administration – on tariffs, immigration and taxes — that could blow their forecasts off course.