Fed Minutes Reveal Broad Support for Holding Rates Steady La

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Dow Jones NewsAug 20, 6:32 PM UTC
DJ Fed Minutes Reveal Broad Support for Holding Rates Steady Last Month -- WSJ

By Nick Timiraos

 

The Federal Reserve's decision to hold interest rates steady last month was broadly supported despite two officials who dissented in favor of a cut, according to minutes of the policy meeting released Wednesday.

 

The minutes said "almost all" officials supported the decision, implying that apart from the two dissenting officials, it was backed by the remaining 16 officials who participated.

 

The decision followed a period of intense political pressure on Fed Chair Jerome Powell by the White House to lower interest rates. Officials maintained their benchmark policy rate in a range between 4.25% and 4.5% as they weighed how importers, retailers and consumers will split the costs of higher duties on imports.

 

The written account of the meeting, released with a customary three-week lag, suggested officials were divided over when they could be confident that higher import costs wouldn't lead to a period of broader, rolling price hikes. Some officials thought "a great deal could be learned in coming months" though others "noted that it would not be feasible or appropriate to wait for complete clarity on the tariffs' effects on inflation before adjusting the stance of monetary policy."

 

While officials worried over the prospect of weaker employment at the meeting, a majority of them thought the risks of higher inflation was "the greater of these two risks."

 

Since that meeting, economic data have strengthened the argument of so-called doves who favor rate cuts because job growth in May and June was revised lower. Competing interpretations of economic data have splintered rate-setters in the ensuing weeks.

 

Governors Christopher Waller and Michelle Bowman, who last month dissented in favor of a cut, have argued that officials shouldn't react to price increases from tariffs, since those aren't likely to be repeated.

 

A handful of officials have lined up with Waller and Bowman indicating they could favor cutting rates at the Fed's next meeting, Sept. 16-17. They have suggested that a slower-than-expected pass-through of tariff hikes to consumer prices should quiet worries about higher import costs creating a new inflation shock.

 

But inflation-focused hawks have pointed to firmer price pressures since last month's meeting, including for services. Kansas City Fed President Jeff Schmid said in a speech last week that tariff effects on inflation had been limited in part because the Fed had held steady.

 

Unlike Bowman, who has taken to calculating what inflation would be excluding tariffs, Schmid promised to never attempt such an exercise, calling it "neither a meaningful nor a measurable concept."

 

Write to Nick Timiraos at [e-mail]

(END) Dow Jones Newswires

 

August 20, 2025 14:32 ET (18:32 GMT)

 
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