Minutes from the FOMC’s June 17–18 meeting highlighted a notable divergence among policymakers on whether rate cuts are needed this year. “Most participant” still see at least one cut as likely, citing temporary tariff effects, stable inflation expectations, and signs of cooling in the labor market. “A couple” went further, indicating they would be open to a rate cut at the upcoming July meeting if economic data confirms their outlook.

However, “some participants” pushed back against easing and suggested “”no reductions” this year, pointing to stubbornly high inflation and warning of upside risks. They argued that “upside risks to inflation remained meaningful”, with businesses and consumers still expecting higher prices, and with economic activity holding up, rate cuts could be premature. Several added that “may not be far above its neutral level”, diminishing the case for near-term action.

Participants generally agreed that risks of both elevated inflation and a weakening labor market have eased somewhat, but remain elevated. “Some” emphasized inflation risks as still “more prominent”, while “a few” flagged labor market deterioration as the more pressing concern. The broad message from the minutes was one of uncertainty, with many policymakers seeing the need take a “careful approach” in adjusting monetary policy.

Full FOMC minutes here.

US consumers grew more optimistic in June, with inflation expectations moderating and perceptions of job security improving, according to the latest New York Fed Survey of Consumer Expectations.

One-year-ahead median inflation expectations fell to 3.0%, reversing the recent uptick to 3.6% in April and returning to January levels. Longer-term expectations were unchanged at 3.0% for the three-year horizon and 2.6% for five years out.

Despite the easing in the overall inflation outlook, households still foresee higher costs in key sectors. Expectations for gas prices rose to 4.2%, while anticipated medical care inflation jumped to 9.3% — the highest since June 2023. Price expectations for college tuition and rent also climbed to 9.1%, and food inflation is still seen at a firm 5.5%. These category-specific pressures suggest that while headline inflation may be easing, households continue to feel cost pressures in essential areas.

Labor market sentiment strengthened, with the perceived probability of losing one’s job in the next 12 months falling to 14.0% — the lowest since December 2024. The improvement was broad-based across age and education groups.

Full NY Fed survey results here.

Fed’s Raphael Bostic signaled strong resistance to near-term rate cuts, citing uncertainty around trade policy and a still-resilient US economy. “This is no time for significant shifts in monetary policy,” he said, emphasizing that the FOMC should avoid decisions it may be forced to “quickly reverse”. With macro conditions steady, Bostic sees “space for patience” while waiting for greater clarity.

The Atlanta Fed chief pushed back on assumptions that the economic impact of Trump administration’s tariff and fiscal policies would be “a short and simple one-time shift in prices”. Instead, he argued that the adjustment process will likely take a year or more, and that both prices and growth may respond in drawn-out, non-linear ways. The implication is that the economy may undergo a “longer period of elevated inflation readings” as it digests structural shifts.

Bostic remains at the cautious end of the FOMC, projecting just one rate cut this year—compared to the median forecast of two.