Key Takeaways
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Interest rates held steady at 4.25%–4.50%.
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The minutes hinted at a shift toward a more dovish stance, with several members discussing potential rate cuts, possibly as early as September, despite Chairman Powell maintaining a more neutral public tone federalreserve.gov+6barrons.com+6reuters.com+6.
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A notable internal split emerged:
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Some participants favored cuts soon, citing signs of inflation cooling.
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Others urged caution, citing sticky inflation, strong jobs data, and uncertainty around tariff-driven inflation reuters.com+7reuters.com+7barrons.com+7.
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Tariff concerns weighed heavily: those from the Trump administration were pointed to as reasons inflation may remain elevated and delay rate cuts. Without such trade tensions, cuts might have occurred earlier .
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Inflation paths and labor dynamics were viewed as central to future decisions. While core inflation had eased for a fourth consecutive month, the Fed is wary of reversal due to tariff pass-through forbes.com+4reuters.com+4investopedia.com+4.
Internal Divide on Rate Cuts
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Dovish camp:
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Pointed to cooling inflation and projected room for cuts in September or year-end.
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Spotting more favorable data trends and reduced uncertainty since May investopedia.com+12barrons.com+12reuters.com+12.
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Hawkish camp:
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Cautioned against hasty moves based on labor and inflation uncertainties.
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Emphasized risks from employment resilience and tariff-related price pressures .
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Market Reaction & Outlook
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Markets raised odds of a September cut, even though July seemed unlikely: ~95% chance of no move in July, ~60% for cut by September investors.com+2barrons.com+2forbes.com+2.
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Fed projections still show two rate cuts in 2025, with the possibility of higher cuts if inflation remains subdued .
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Powell publicly expressed openness to “any timing… meeting by meeting,” though markets tempered expectations after strong labor data ft.com.
Bottom Line
The minutes reveal a cautious pivot: while the Fed held rates steady, conversations increasingly leaned toward cutting—yet timing remains data-dependent, especially with tariff-related inflation and labor dynamics clouding the path forward.
