Minutes of the Federal Reserve's December meeting showed that U.S. real GDP has grown moderately so far this year, the labor market has continued to cool, and wage growth has been roughly on par with the same period last year. While economic activity was solid in the third quarter, the average growth rate in the first three quarters of the year remained modest, falling short of the previously projected pace for 2024. A government shutdown is expected to weigh on short-term GDP.

Fed staff projected that as financial conditions ease and the impact of tariffs fades gradually, economic growth will run slightly above its potential level after 2025, the unemployment rate will edge lower, and inflation will return to the 2% target in 2028 following short-term pressures. However, overall uncertainty remains elevated. Meeting participants generally agreed that risks to inflation remain tilted to the upside, whereas risks related to the labor market are skewed to the downside.