Fed Minutes Expose Deep Divisions on Rate Cuts, Hint at July Action
Fed Minutes Expose Deep Divisions on Rate Cuts, Hint at July Action
Newly released minutes from the Federal Reserve’s late June meeting reveal significant internal divisions among policymakers regarding the future path of interest rates. Despite a unanimous vote to maintain the current base rate at 4.25%-4.5% last month, the notes, released yesterday, indicate growing dissent within the Federal Open Market Committee (FOMC).
A majority of participants expressed a desire to see a rate cut this year, with some even open to a reduction as early as July if upcoming economic data supports the move. These officials cited potentially temporary or modest inflationary pressures from tariffs and well-anchored medium- and longer-term inflation expectations. This stance aligns with President Trump’s long-standing calls for lower rates.
Conversely, a segment of participants argued for holding the current rate throughout the year, citing inflation readings that still exceed the 2% target and potential risks to short-term inflation. The minutes also highlighted divisions on the emphasis between the Fed’s dual mandates of inflation and maximum employment, as well as the impact of the White House’s tariff regime on inflation.
The release underscores the ongoing debate within the central bank, with analysts labeling the current cautious approach as ‘masterful inactivity,’ as the Fed navigates economic ambiguities and internal disagreements just weeks before its next critical meeting.
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