Fed minutes reveal deep division on rate path

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.