Stock Market Update

[BRIEFING.COM] The S&P 500 (flat) is hovering near flat lines, consolidating a rebound from the prior two hours. Trading has been range bound for the last two hours as investors play a risk-off game into the final few hours of trading.

The December minutes show a Fed that is cautiously pivoting toward easing, but with clear internal debate. Most participants supported a 25 bp rate cut, citing rising downside risks to employment and a cooling labor market, though several characterized the decision as finely balanced and some preferred no change. Policymakers broadly agreed that further cuts could be appropriate if inflation continues to decline as expected, but many emphasized that policy is not on a preset path and that holding rates steady for a time after December may be warranted to assess lagged effects and inflation progress.

Inflation remained the central tension. While participants generally expect inflation to gradually return to 2%, with tariff-driven pressures fading and housing inflation easing, many judged that upside risks to inflation are still elevated. Several warned that cutting too aggressively could risk entrenching inflation or be misinterpreted as weakening the Fed’s commitment to its target, underscoring the importance of keeping longer-run inflation expectations well anchored even as policy moves toward a more neutral stance.

On balance sheet policy, officials agreed that reserve balances have declined to "ample" levels and approved initiating reserve management purchases of shorter-term Treasuries to maintain smooth money market functioning. Policymakers stressed that these purchases are purely technical, aimed at interest-rate control rather than signaling any change in the stance of monetary policy, while also removing limits on standing repo operations to bolster rate control amid tighter funding conditions.