The highlighted points from the FOMC July meeting
Almost all participants at Fed’s July 29–30 meeting viewed it as appropriate to maintain the benchmark interest rate in 4.25%–4.50% range
Participants also noted it would take time to have more clarity on the magnitude and persistence of higher tariffs’ effects on inflation
Participants assessed impact of tariffs had become more apparent in goods prices, but overall effects on economy, inflation remained to be seen
Some participants said it would not be feasible or appropriate to wait for complete clarity on the tariffs’ effects on inflation before adjusting monetary policy
Several participants said the current target range for the federal funds rate may not be far above its neutral level
A couple of participants highlighted the role of the standing repo facility in monetary policy implementation and expressed support for further study of central clearing of SRF
Fed staff’s real GDP projection for 2025 through 2027 was similar to the one prepared for the June meeting
Participants said consensus statement would be designed to be robust across a wide range of economic conditions
Participants noted that the policy committee was close to finalizing changes to the consensus statement as part of framework review
Fed staff said GDP projection for 2025 through 2027 was similar to the one prepared for June meeting
Participants said consensus statement would be designed to be robust across a wide range of economic conditions
Fed dissenters appeared alone in favoring rate cut at July meeting, minutes show
The majority viewed upside risk to inflation as the greater risk
Several saw the risks as balanced
A couple solved the employment as the more salient risk.
Parsing out qualifiers from the minutes:
Majority View
A majority of participants judged that upside risk to inflation was the greater concern compared to downside risk to employment.
Participants generally expected inflation to increase in the near term due to tariffs.
Participants generally agreed the Fed was well positioned to respond flexibly to incoming data with policy moderately restrictive.
Participants generally agreed upside risk to inflation and downside risk to employment both remained elevated.
Almost All Participants
Almost all participants viewed it as appropriate to maintain the target range for the federal funds rate at 4.25%–4.50%.
Almost all participants agreed that, with the labor market still solid, the Committee was well positioned to respond to developments in a timely way.
Almost all members voted to hold rates steady; only two dissented, preferring a 25 bp cut.
Some Participants
Some participants observed business reluctance to hire or fire amid elevated uncertainty.
Some participants mentioned indicators pointing to softening in labor demand, including slower job growth and rising youth unemployment.
Some participants argued slower output or job growth wasn’t necessarily slack, citing reduced immigration.
Some participants noted consumer spending was supported by financial conditions, even as growth slowed.
Some participants judged it would not be feasible or appropriate to wait for full clarity on tariffs’ effects before adjusting policy.
Some participants emphasized tariff persistence depends critically on monetary policy stance.
Several Participants
Several participants emphasized inflation had exceeded 2% for an extended period, raising risks to long-term expectations.
Several participants noted low, stable unemployment reflected both low hiring and low layoffs.
Several participants stated they expected growth to remain low in the second half of the year.
Several participants observed slower income growth was weighing on consumer spending.
Several participants remarked policy uncertainty was slowing business investment, though sentiment had recently improved.
Several participants noted vulnerabilities from elevated asset valuations.
Several participants commented the current funds rate may not be far above neutral.
Several participants observed balance sheet reduction had proceeded smoothly, with reserves still ample but needing close monitoring.
A Couple of Participants
A couple of participants suggested tariff effects were masking the underlying inflation trend, which was close to target.
A couple of participants remarked that over time, resolution of policy uncertainty would support growth.
A couple of participants highlighted stable or low credit card delinquencies as supportive of household spending.
A couple of participants noted vulnerabilities in banks from higher long-term yields causing unrealized losses.
A couple of participants discussed vulnerabilities in foreign exchange swaps as sources of dollar funding but with rollover risk.
A couple of participants highlighted the role of the SRF in policy implementation and supported studying central clearing.
A couple of members dissented, preferring a 25 bp cut, judging inflation (ex-tariffs) close to 2% and downside employment risk higher.
A Few Participants
A few participants stressed tariff effects would likely be one-time increases in price level.
A few participants warned tariffs and supply chain issues could lead to stubbornly elevated inflation.
A few participants observed firms were using strategies to absorb tariff costs (supplier switching, automation, tighter margins).
A few participants noted weak housing demand with falling prices.
A few participants pointed to headwinds in the agricultural sector.
A few participants expressed concern over vulnerabilities in Treasury market structure (hedge funds, low depth).
A few participants warned abrupt declines in reserves could occur around key settlement dates.
Various Participants
Various participants emphasized monetary policy’s central role in preventing tariffs from unanchoring inflation expectations.
Various participants discussed stablecoins after passage of the GENIUS Act, highlighting both efficiency benefits and risks to financial stability.
Fed Staff
Fed staff projected real GDP growth similar to June, with weaker consumption and investment offset by easier financial conditions.
Fed staff inflation projection slightly lower, with tariffs expected to boost prices this year and in 2026 before returning to 2% by 2027.
Fed staff judged risks to real activity skewed to downside, while risks to inflation remained skewed to upside.
This article was written by Greg Michalowski at investinglive.com.