Some members of the Federal Open Market Committee (FOMC) pointed out that inflation progress in the United States could “stagnate,” and highlighted the risks of cutting interest rates “too quickly,” according to the minutes of the January decision, published on Wednesday afternoon.

“The majority of Fed members noted the risks of easing interest rates too quickly and emphasized the importance of upcoming data to judge whether inflation is sustainably moving toward the 2.0% target,” the document added.

Immediately after the minutes were released, the S&P500, Dow Jones, and Nasdaq 100 indices fell by 0.44%, 0.34%, and 0.77%, respectively. At the same time, yields on two-year Treasuries – more sensitive to short-term monetary policy – rose by 3.5 basis points to 4.651%. The ten-year yields advanced 3.6 bps to 4.315%.

According to the document, committee members generally observed that it is not deemed “appropriate” to reduce interest rates until gaining “greater confidence” that inflation is sustainably moving towards the target. They also noted “high uncertainty” about how long the level of restrictive interest rates would be needed.

The Fed staff also placed “some weight” on the probability that further disinflation progress could take longer than expected. According to the Fed’s economic staff, the outlook for activity was “somewhat” stronger compared to the December projections.

Some participants also noted that slowing down the balance sheet reduction process could allow the situation to continue for a longer time. According to the minutes, many participants suggested starting “in-depth” discussions about the balance sheet at the March meeting.

The FOMC kept the Fed Funds target rate unchanged in the range between 5.25% and 5.50% at the most recent interest rate decision at the end of January. In the press conference that followed the decision, Fed Chairman Jerome Powell strongly downplayed the chances of an interest rate cut at the March meeting, contrasting the initial view of many investors about relief in the first quarter.

Derivatives traded on the Chicago Mercantile Exchange (CME) indicated a 52.7% chance of a 25 basis-point cut in the Fed Funds target rate at the FOMC’s June decision, compared to a 53.9% chance projected the day before. At the same time, investors increased the chances of maintaining the interest rate in May to 69.9%, from 65.5% on Tuesday. The next FOMC meeting will take place on March 19 and 20.