By Nick Timiraos

Federal Reserve officials signaled little appetite for reducing interest rates at their meeting last month, with most indicating they wanted to see further progress on inflation before considering any further cuts -- a process that could take months.

Moreover, even though two officials opposed the decision to hold rates steady at their Jan. 27-28 meeting and favored a cut, minutes of the meeting showed that other officials would have supported more neutral language characterizing the prospect of a rate cut or a rate hike as evenly balanced.

The minutes said those officials would have been comfortable changing the Fed's carefully drafted postmeeting statement to reflect the possibility that rate increases could be warranted if inflation continued to run above the Fed's target.

"Several participants indicated that they would have supported a two-sided description of the committee's future interest rate decisions, reflecting the possibility that upward adjustments" in interest rates "could be appropriate if inflation remains at above-target levels," said the minutes.

The Fed held its benchmark short-term rate steady in a range between 3.5% and 3.75% on a 10-2 vote, the first time the central bank had held rates steady since July.

At a news conference after the meeting, Fed Chair Jerome Powell said officials were "well positioned" and declined to specify what conditions would prompt another rate cut. That was a signal the committee saw no urgency to cut rates after lowering them by a quarter point at their last three meetings of 2025, between September and December.

The last of those cuts was unusually divisive, with Powell arguing in favor to insure against the risks of a sharper slowdown in the labor market. Others were less concerned about weaker job growth and more anxious about inflation that made little to no progress moving down to the Fed's 2% target last year.

Powell also downplayed the prospect of a rate hike at the news conference. "That's not where people's expectations are right now," he said.

President Trump has been vocal in his desire for the Fed to cut rates faster, and two days after last month's meeting, he announced his intention to nominate former Fed governor Kevin Warsh to succeed Powell, whose term as chair ends in May.

The minutes, released with a customary three-week lag, revealed that more officials were less worried about the labor market than they had been and more apprehensive about inflation.

Most officials, the minutes said, cautioned that progress bringing inflation down "might be slower and more uneven than generally expected." The risk that inflation might run persistently above the Fed's 2% goal "was meaningful," they said. Likewise, the Fed's staff inflation forecast described an interval of more persistent, above-target inflation as "a salient risk," according to the minutes.

Data released after the January meeting is likely to embolden officials who don't feel any urgency to continue reducing interest rates, and the Fed is widely expected to stand pat again at their meeting next month.

Last week, the Labor Department reported that employers added a larger-than-expected 130,000 jobs in January, and the unemployment rate ticked down to 4.3%, easing concerns about a sharper labor-market slowdown. Still, annual revisions revealed that job growth slowed very sharply over the last year.

Prices as measured by the consumer-price index rose 2.4% for the 12 months ended January, near a five-year low. But other price gauges were firm. Goods excluding food, energy and used cars posted their largest monthly increase in three years, a sign that tariffs are showing up more broadly on store shelves. Price increases for services excluding energy and housing were also elevated. The Fed's 2% inflation target is measured against a separate index that has been running slightly above the CPI.

Write to Nick Timiraos at Nick.Timiraos@wsj.com

(END) Dow Jones Newswires

February 18, 2026 14:17 ET (19:17 GMT)

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