MNI: Fed Well-Placed To Assess Two-Way Risks - July Minutes
Aug-20 18:12By: Evan Ryser
Federal Reserve+ 1
Federal Reserve policymakers discussed upside inflation risks and downside risks to the labor market at last month's policy meeting as "almost all" policymakers decided to keep interest rates on hold for a fifth time this year, according to minutes of the meeting.
"Almost all participants viewed it as appropriate to maintain the target range for the federal funds rate at 4.25% to 4.5%" minutes released Wednesday showed.
"Participants generally pointed to risks to both sides of the Committee’s dual mandate, emphasizing upside risk to inflation and downside risk to employment, the report said. "A majority of participants judged the upside risk to inflation as the greater of these two risks, while several participants viewed the two risks as roughly balanced, and a couple of participants considered downside risk to employment the more salient risk."
The minutes come against the backdrop of the Jackson Hole symposium starting Thursday, White House pressure on the Fed and any clues on the September decision in Jerome Powell's speech Friday.
The Fed held rates steady in July despite officials splintering over the right time to restart cuts after an extended pause and attacks from President Trump. The post-meeting statement included minimal changes and maintained optionality around adjusting the policy rate.
Christopher Waller, a governor, and Michelle Bowman, vice chair for supervision — both of whom were appointed by Trump — supported the Fed lowering rates a quarter point. The last time two members opposed a decision related to monetary policy was in 1993 when Alan Greenspan was chair.
The July employment report, released a couple days after the Fed's last meeting, showed larger-than-normal downward revisions to May and June employment of 258k jobs, while job growth since May has fallen to an average of 35,000. Additionally for July, the CPI report saw further acceleration in monthly core inflation and strong PPI data.
The central bank will receive another CPI and labor market report before its mid-September meeting, when it will release a new Summary of Economic Projections. The June SEP showed a median of two rate cuts for 2025, GDP growth of 1.4%, and core PCE inflation at 3.1% by year-end. Tariffs are widely seen as dampening economic activity while pushing inflation higher, at least in the near term.
Markets are currently pricing in an 85% chance of a cut in September and a two quarter-point cuts by the end of the year. The Fed's policy rate has been at 4.25-4.5% since December.
Policymakers also discussed a review of its framework and noted said it was "close to finalizing changes to the consensus statement and would do so in the near future." In an assessment of its QT program, officials said reserves remain abundant but staff will be keeping a close eye of indicators as the Treasury Department rebuilds its cash pile.
