Highlights
The minutes of the June 17-18 FOMC meeting offers little fresh insight after Fed Chair Jerome Powell's press conference on June 18 and his subsequent two days of testimony before Congress on June 24 and 25. The minutes reflect conditions of three weeks ago and don't take into account more recent geopolitical developments.
At the time of the meeting, market perceptions of downside risk to growth and upside risk to inflation had seen some paring back. The median respondent's modal path for the federal funds rate in the June survey shifted higher through 2026 and implied two 25 basis point rate cuts both this year and next year, the minutes said. This is at slightly odds with the update to the summary of economic projections (SEP) for June which is consistent with two 25 basis point rate cuts this year and one 25 basis point rate cut next year.
Three weeks ago the staff economic outlook, The staff judged the risks around the projections of real GDP growth and employment as still skewed to the downside, though they saw the risk of a recession as less than at the time of their previous forecast. The staff continued to view the risks around the inflation forecast as skewed to the upside, as the projected rise in inflation this year could be more persistent than assumed in the baseline projection. However, the geopolitical risks to the economic outlook are more uncertain after US support to attacks on Iranj became material on June 21. The upside risks to inflation may be more solid about now that President Trump's July 9 deadline has been reached and some countries are facing higher tariffs while others have until August 1 to make deals. In either case, uncertainty remains elevated. Fed policymakers will have little reason to alter their cautious stance.
At the time of the meeting, growth in the US economy was deemed solid and the unemployment rate low. Inflation remained somewhat elevated but had come down. The minutes said, In discussing their outlooks for inflation, participants noted that increased tariffs were likely to put upward pressure on prices. There was considerable uncertainty, however, about the timing, size, and duration of these effects. The unsettled situation around tariff policy continues.
Labor market conditions were also considered solid at the time of the June meeting, and that the labor market was at, or near, estimates of maximum employment. Several participants observed that the recent stability of the labor market reflected a slowing in both hiring and layoffs, and several participants also mentioned that their contacts and business survey respondents reported pausing hiring decisions because of elevated uncertainty.
The minutes continued, Several participants noted that immigration policies were reducing labor supply. In their outlook for the labor market, most participants suggested that higher tariffs or heightened policy uncertainty would weigh on labor demand, and many participants expected a gradual softening of conditions. This appears to be in line with the data in the June employment report released on July 3.
FOMC participants noted the weakness in surveys of consumer and business confidence that was leading to some hesitancy on spending and investment.
The committee was clearly aware of the potential for tension in the dual mandate to develop and make setting policy more difficult. The minutes said, Participants noted that the Committee might face difficult tradeoffs if elevated inflation proved to be more persistent while the outlook for employment weakened. If that were to occur, participants agreed that they would consider how far the economy is from each goal and the potentially different time horizons over which those respective gaps would be anticipated to close. On balance, based on the current economic data, the risks to inflation and inflation expectations dictates that the FOMC stay the course with only gradual rate cuts when appropriate to the present fed funds target rate range of 4.25-4.50 percent.
At the time of the meeting, market perceptions of downside risk to growth and upside risk to inflation had seen some paring back. The median respondent's modal path for the federal funds rate in the June survey shifted higher through 2026 and implied two 25 basis point rate cuts both this year and next year, the minutes said. This is at slightly odds with the update to the summary of economic projections (SEP) for June which is consistent with two 25 basis point rate cuts this year and one 25 basis point rate cut next year.
Three weeks ago the staff economic outlook, The staff judged the risks around the projections of real GDP growth and employment as still skewed to the downside, though they saw the risk of a recession as less than at the time of their previous forecast. The staff continued to view the risks around the inflation forecast as skewed to the upside, as the projected rise in inflation this year could be more persistent than assumed in the baseline projection. However, the geopolitical risks to the economic outlook are more uncertain after US support to attacks on Iranj became material on June 21. The upside risks to inflation may be more solid about now that President Trump's July 9 deadline has been reached and some countries are facing higher tariffs while others have until August 1 to make deals. In either case, uncertainty remains elevated. Fed policymakers will have little reason to alter their cautious stance.
At the time of the meeting, growth in the US economy was deemed solid and the unemployment rate low. Inflation remained somewhat elevated but had come down. The minutes said, In discussing their outlooks for inflation, participants noted that increased tariffs were likely to put upward pressure on prices. There was considerable uncertainty, however, about the timing, size, and duration of these effects. The unsettled situation around tariff policy continues.
Labor market conditions were also considered solid at the time of the June meeting, and that the labor market was at, or near, estimates of maximum employment. Several participants observed that the recent stability of the labor market reflected a slowing in both hiring and layoffs, and several participants also mentioned that their contacts and business survey respondents reported pausing hiring decisions because of elevated uncertainty.
The minutes continued, Several participants noted that immigration policies were reducing labor supply. In their outlook for the labor market, most participants suggested that higher tariffs or heightened policy uncertainty would weigh on labor demand, and many participants expected a gradual softening of conditions. This appears to be in line with the data in the June employment report released on July 3.
FOMC participants noted the weakness in surveys of consumer and business confidence that was leading to some hesitancy on spending and investment.
The committee was clearly aware of the potential for tension in the dual mandate to develop and make setting policy more difficult. The minutes said, Participants noted that the Committee might face difficult tradeoffs if elevated inflation proved to be more persistent while the outlook for employment weakened. If that were to occur, participants agreed that they would consider how far the economy is from each goal and the potentially different time horizons over which those respective gaps would be anticipated to close. On balance, based on the current economic data, the risks to inflation and inflation expectations dictates that the FOMC stay the course with only gradual rate cuts when appropriate to the present fed funds target rate range of 4.25-4.50 percent.
Definition
Detailing the issues of debate and consensus among policymakers, the Federal Open Market Committee issues minutes of its latest meeting three weeks after the meeting.
Description
The FOMC has changed dramatically in the transparency of its operations. It now discloses policy changes at the end of each meeting. Historically, the Fed used to keep investors guessing about policy changes and Fed officials did not appear on the speaking circuit as frequently as they do now.
The Fed's minutes are a market mover as investors and analysts parse each word looking for clues to policy. The minutes include the complete economic analysis compiled by Fed officials and opinions at odds with the consensus.
Investors who want a more detailed description of Fed opinions will generally read the minutes closely. Fed officials also make numerous speeches, which give their views to the public at large.
The Fed's minutes are a market mover as investors and analysts parse each word looking for clues to policy. The minutes include the complete economic analysis compiled by Fed officials and opinions at odds with the consensus.
Investors who want a more detailed description of Fed opinions will generally read the minutes closely. Fed officials also make numerous speeches, which give their views to the public at large.
