Fed minutes show split on cuts; holds at 4.25-4.50% amid tariffs

The Federal Reserve’s July policy meeting minutes show a notably divided committee weighing a delicate balance between inflation risk and a cooling labor market, while deciding to keep the federal funds rate unchanged at 4.25%–4.50%. Two senior governors dissented, urging a 25 basis-point cut, signaling a clear split over how aggressively to respond to tariff-driven price pressures and an otherwise slowing economy. The minutes convey a policy stance that is cautious but not decisively dovish, with most participants emphasizing that tariff effects are becoming more visible in goods prices even as inflation expectations remain a key concern.

A central theme in the minutes is the tension between inflation risk and labor-market momentum. Several officials argued that higher tariffs could push inflation higher and more persistently than currently anticipated, particularly in goods prices, and that waiting for perfect clarity on tariffs before adjusting policy would be imprudent. Yet a minority, including Governor Michelle Bowman and Governor Christopher Waller, contended that inflation pressures would not prove persistent once tariff effects pass through, arguing that the policy...