Federal Reserve officials diverged at their June meeting on how aggressively they would cut interest rate cuts and concerns about tariff fuel inflation and signs of weakness in the labor market and economic strength.
In minutes after the June 17-18 meeting released on Wednesday, it was shown that policymakers are being held in waiting positions, primarily in future fee movements. The meeting ended with members of the federal government’s open market committee unanimously voting to hold the central bank’s key borrowing rates in the range of 4.25%-4.5%.
However, the summary also shows that there is a growing gap in how policies progress from here.
“Most participants rated that some reductions in the target range for this year’s federal funding rate would likely be appropriate,” he said at the time that tariff-induced inflationary pressures were potentially considered “temporary and modest,” which could weaken economic growth and employment.
However, how far the cut could go was a matter of debate.
The opinion ranged from “couple” officials who said the next cut would come to “some” who thought this month’s cuts weren’t appropriate. Although no names are mentioned in the minutes, Fed Governors Michelle Bowman and Christopher Waller are on record saying they will be able to see how to cut fees as soon as the July 29-30 Fed meeting stays under control.
At the same time, “several” officials said they believe the current overnight funding rate is “not too far.” In other words, it may only be a few cuts ahead. These officials cited inflation, which is still above the 2% target in a “resilient” economy.
In Fed terminology, some are more than a few.
Meeting officials updated their forecasts for interest rate cuts, with three more predicted over the next few years, following two this year.
The release adds pressure from President Donald Trump to actively cut Fed Chairman Jerome Powell and his cohort. With his official statement and his true social site, Trump is denounced Powell and seeking his resignation.
Powell has repeatedly said he will not succumb to political pressure when it comes to setting monetary policy. Most often he joins a cautious approach, claiming that the strong economy and uncertainty about inflation makes the Fed in a good position to hold it up until more information is available.
The minutes primarily reflect the stance that the policy is currently suited to respond to changes in data.
“Participants agreed that while uncertainty about inflation and economic outlook has decreased, it is appropriate to take a cautious approach when adjusting monetary policy,” the document said.
The authorities also said, “If inflation rises turns out to be more sustainable while employment outlook is weakened, we could face difficult trade-offs.” In that case, they said they would weigh which sides are far from their goals in developing the policy.
Since the meeting, Trump has continued to negotiate with major US trading partners, with tariff ground shifting on a nearly day-to-day basis. Trump first announced tariffs on April 2nd, then changed the contract deadline. Recently, he has engraved a series of letters to foreign leaders, notifying them of tax imminent taxation if they do not act.
Recent data shows that Trump’s tariffs are not being supplied to prices at least on a large scale.
The consumer price index showed an increase of just 0.1% in May. Although inflation gauges still primarily surpass the Fed’s 2% target, recent sentiment surveys show that the public is not afraid of future inflation.
“Many participants noted that if they reach a trade agreement quickly, if the company can adjust its supply chain quickly, or if other adjustment margins can be used to expose the company to tariff impacts, the ultimate impact of tariffs on inflation could be more limited,” the minutes stated.
At the same time, although employment profits have slowed considerably, non-farm payroll growth has consistently surprised economists. June showed an increase of 147,000 against a consensus forecast of 110,000, but the unemployment rate unexpectedly fell to 4.1%.
Consumer spending has been slower. Personal spending fell 0.1% in May, while retail sales fell 0.9%.
