FOMC Minutes: ‘A couple’ of policymakers to consider rate cuts in July and ‘most’ before year-end

[Redator]

Minutes from the Fed’s June 17-18 policy meeting, released at 14:00 EDT, have done little to change the narrative surrounding future monetary policy decisions.

Markets predict the Federal Reserve will maintain rates on July 30th and make its first 2025 rate cut in its September 17th decision.

Fed Minutes June 17-18: Key takeaways

• Unanimous in vote to maintain the federal fund rate between 4.25 and 4.50%, minutes reaffirmed the Fed’s concerns on tariff-borne inflation, although acknowledged that uncertainty on the general economic outlook has “diminished but remains elevated”
• While predictions for a July rate cut remain essentially unchanged, the minutes shed light on the diverging views held by policymakers about how lax the Fed should be during the current easing cycle

EUR/USD, OANDA, TradingView, 09/07/2025

Most participants assessed that some reduction in the target range for the federal funds rate this year would likely be appropriate, noting that upward pressure on inflation from tariffs may be temporary or modest, that medium- and longer-term inflation expectations had remained well anchored, or that some weakening of economic activity and labor market conditions could occur.

Minutes of the Federal Open Market Committee, June 17–18, 2025

Fed Minutes June 17-18: Majority expect rate reduction this year

In a nutshell, three schools of thought currently exist amongst Fed policymakers, albeit to varying degrees of popularity:

1. The majority of policymakers think that at least some reduction in the federal fund rate is both likely and appropriate before year-end, drawing reference to the temporary impact of tariffs on inflation, and longer-term inflation trends remaining “well-anchored”
   
   
2. Some policymakers think that the most appropriate path would be to make no reductions in the federal fund rate before year-end, mentioning that inflation remains sticky, and importantly, above the 2% target
   
   
3. A couple of policymakers are in support of reductions in the federal fund rate as soon as the next meeting, should “data evolve in line with expectations”

CME FedWatch, CME Group 24/06/2024

Fed Minutes June 17-18: “Swings” in export data spook Fed

With the latest on Trump tariffs hitting headlines again earlier this week, minutes released today from the Federal Reserve’s June meeting, renewing fears of tariff-borne inflation, could perhaps have come at a better time.

In the report, the Fed cited the potential for tariffs to disrupt supply chains and affect productivity. The Fed also questioned the consistency of recent export data, inferring that tariffs and their short-term effect on exports are muddying the waters that would otherwise allow the Federal Reserve a more straightforward path towards rate cuts.

Remaining staunch in their ‘wait-and-see’ policy for much of this year, while assuring that future decisions will be made on data alone, most will remain unsurprised that the Federal Reserve is erring on the side of caution.

When considering recent developments on US trade, extending tariff deadlines to August 1st, concerns made in FOMC minutes are now somewhat vindicated, and this offers the Fed further rationale to delay rate cuts, should they wish to.

Fed Minutes June 17-18: Inflation remains above the 2% target

Somewhat predictably, minutes would confirm that the Federal Reserve seems less concerned about the trend of falling inflation and more concerned that it remains above the target of 2%, mentioning recent PCE figures.

Cited as “somewhat elevated” both in the immediate policy statement and minutes, the phrasing around inflation highlights ongoing concern, especially compared to the more complimentary commentary of current US labor numbers.

The report’s description of the labor market as “solid” and unemployment as “low” would suggest that, in a vacuum, recent labor market numbers would support the notion of rate cuts.

Read the complete minutes here: Minutes of the Federal Open Market Committee, June 17–18, 2025

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