Federal Reserve policymakers signaled patience on future rate cuts, pointing to early signs of tariff-driven inflation. According to minutes from the July 29–30 Fed meeting, officials stressed the need to wait for more clarity on the full impact of President Trump’s tariffs before making policy changes.
“Participants noted that the effects of higher tariffs were starting to show up in the prices of some goods,” the minutes said. “But the overall impact on economic activity and inflation was still unclear. More time is needed to determine the size and persistence of these effects.”
At the July meeting, the Federal Open Market Committee (FOMC) voted to keep the benchmark rate steady at 4.25% to 4.50%. However, Michelle Bowman and Christopher Waller dissented, marking the Fed’s first double dissent since 1993. Both expressed concern that labor market weakness could be a bigger threat than inflation.
Still, most policymakers judged the upside risk to inflation as the greater danger. Only “a couple of participants” considered rising unemployment to be the more urgent risk.
Recent data have been mixed. Core CPI surprised to the upside, while labor market numbers came in weaker. Investors now appear to be leaning toward Bowman and Waller’s concerns, with many seeing unemployment as the bigger risk.
Markets have already priced in a September rate cut, according to the Fed Rate Monitor Tool. Still, the minutes suggested that the cycle of cuts may be limited, as broader financial conditions remain supportive of economic growth.
The release of the minutes comes just days before Fed Chair Jerome Powell’s speech at Jackson Hole. Investors will watch closely to see if Powell confirms or tempers expectations for aggressive rate cuts.
