Minutes FOMC: Cautious approach from the Fed

• The Fed is currently in a good position regarding its policy tools and is waiting for further data

• A cautious approach is justified by uncertainty about the future

• Nearly all members see the risk of persistent inflation

• Dollar weakness is attributed to concerns over the effects of trade policy

• Some members point to the difficult trade-off between inflation and economic growth

• Most Fed members believe that rising tariffs represent a bigger and broader risk

• Tariffs are significantly larger and broader than initially expected

• Concerns about long-term inflation expectations, although expectations remain well-anchored

• The decline in safe haven status may have long-term consequences

The published FOMC minutes highlight the Federal Reserve’s ongoing cautious stance in monetary policy. The Fed emphasizes that, amid current economic uncertainty and elevated inflation, maintaining a “cautious approach” and waiting for greater clarity on the economic outlook is appropriate.

Most FOMC members see a risk that inflation may remain elevated for longer, and some express concerns that long-term inflation expectations could become unanchored, which would be undesirable for price stability. They also note the potential for difficult trade-offs if inflation does not ease and economic growth slows.

Additionally, the minutes underline that the dollar’s weakness is largely due to concerns about the effects of trade policy, including tariff wars, which are seen as an increasingly significant and widespread threat to the US economy.

In summary, the FOMC remains in “wait and see” mode, ready to respond if conditions change, but currently sees no need for rapid action. Inflation risks and uncertainty regarding trade policy effects dominate the economic outlook. EURUSD and US500 remained unchanged after the release.