Minutes from the July FOMC meeting
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Majority of FOMC members viewed upside risks to inflation as outweighing employment risks, especially given ongoing tariff-related uncertainty.
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Policymakers kept the federal funds rate unchanged at 4.25%–4.5%, citing both moderate economic growth and persistent inflationary pressures.
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Some officials underscored that inflation had remained above 2% for an extended period, raising concerns about longer-term unanchoring of inflation expectations.
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The Committee debated whether the impact of tariffs would be transitory or could trigger a more persistent inflation shock.
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Full effects of tariffs on prices—particularly consumer goods—were expected to take time to materialize.
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Recent downward revisions in payroll growth and rising unemployment (now at 4.2%) reflect signs of labor market slowing, strengthening the case for dissenting calls for a rate cut.
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Concerns over elevated asset valuations were raised, signaling ongoing financial stability risks.
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The minutes precede a key Jerome Powell speech at Jackson Hole, where further policy clues may emerge.
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Political pressure on the Fed is mounting, with the White House urging lower rates and the removal of Governor Lisa Cook after fraud allegations.
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The Committee will revisit policy with updated jobs and inflation data at its mid-September meeting
Overall, the reception of the minutes is hawkish, given the focus on inflation risks. Importantly, the last Fed decision took place before the release of very weak July NFP data, which could weigh on upcoming policy discussions. However, the impact on the USD has been limited, as markets await Powell’s upcoming Jackson Hole speech for clearer direction. EURUSD decreased 10 pips after the minutes release, but we can clearly say that the reaction is very muted.
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