The bulk of policymakers at the Federal Reserve’s last meeting were concerned about the risks of cutting interest rates too soon, with broad uncertainty about how long borrowing costs should remain at their current level, according to minutes of the Jan. 30-31 session.

“Participants highlighted the uncertainty associated with how long a restrictive monetary policy stance would need to be maintained” to return inflation to the Fed’s 2% target, the minutes said.

Whereas “most participants noted the risks of moving too quickly to ease the stance of policy,” only “a couple … pointed to downside risks to the economy associated with maintaining an overly restrictive stance for too long.”

Policymakers “generally” agreed that they needed “greater confidence” in falling inflation before considering cutting rates, the minutes said in language that seemed to emphasize a careful and perhaps slower approach to rate cuts that market participants now expect to commence in June.

“Some participants” cited a risk that progress on inflation could outright stall if the economy continued to perform as strongly as it has, the minutes said.

The Fed at its January meeting held its benchmark overnight interest rate steady in the 5.25%-5.50% range set in July and opened the door to rate cuts once policymakers “gained greater confidence that inflation is moving sustainably” to the central bank’s 2% target.

Fed Chair Jerome Powell at his press conference on Jan. 31 essentially ruled out a rate cut at the March 19-20 meeting, and the minutes suggest it wasn’t a particularly close call.

Data released after the last Fed meeting showed stronger-than-expected job growth and inflation in January. While those reports have not shifted the overall view among policymakers that inflation will continue to fall this year, they did little to add to the “confidence” policymakers want before easing the tight monetary policy used to battle the worst outbreak of inflation since the 1980s.

Fed staff, meanwhile, took note of a variety of risks, from “notable” vulnerabilities in the US financial system, including falling commercial real estate prices, to the possibility that “reducing inflation could take longer than expected.” That in turn might “slow the pace of real activity” more than expected.

The minutes also noted upcoming decisions on when and how to stop reducing the size of the Fed’s balance sheet, with “many participants” suggesting a start to “in-depth” discussions on balance sheet policy at the upcoming March meeting.

The rapid easing in financial conditions during the fourth quarter of 2023 after the Fed began signaling that rate hikes were likely over had largely run its course by the time officials gathered at the end of January.

Since then, the picture has been mixed: Treasury yields have increased by more than a quarter of a percentage point, bringing an end for the time being to a decline in consumer and corporate borrowing costs, but stocks have continued to march to record highs.