Fed Meeting Minutes Reveal Only Two Officials Supported Rate Cut in July, No Broader Support Among Participants

August 21 — Minutes from the Federal Reserve’s July policy meeting, released Wednesday, reveal that the decision to maintain the federal funds rate at 4.25%–4.50% was supported by nearly all participants, with only two officials advocating for a rate cut. Their proposal did not receive backing from the broader committee.

Vice Chair Michelle Bowman and Governor Christopher Waller recommended a 25-basis-point reduction, citing concerns about worsening labor market conditions. This marks the first instance since 1993 where more than one Fed governor formally dissented on a rate decision, highlighting growing internal divisions amid rising tariff pressures.

Two days after the meeting concluded, the U.S. Department of Labor published July’s nonfarm payroll report, which appeared to support Bowman and Waller’s position. Employment growth fell short of forecasts, the jobless rate increased, and labor force participation dropped to its lowest level since late 2022.

In a more striking development, the Labor Department revised May and June employment figures downward by over 250,000 jobs. These adjustments challenged the prevailing narrative of labor market strength and led President Donald Trump to dismiss the head of the Bureau of Labor Statistics.

Meanwhile, inflation indicators added weight to concerns about persistent price pressures. July’s core Consumer Price Index (CPI) came in above expectations, and the Producer Price Index (PPI) posted an unexpected surge. These figures intensified market anxiety over the inflationary impact of Trump’s tariff policies.

The minutes detailed a robust debate among Fed officials regarding the extent to which tariffs are influencing inflation and whether current interest rate levels remain restrictive. Some participants suggested that the federal funds rate may be nearing a neutral stance—neither stimulating nor constraining economic activity.

While acknowledging that elevated tariffs have already affected prices for certain goods, officials noted that broader implications for inflation and overall economic performance remain unclear. Looking ahead, they cautioned that persistent inflation combined with a weakening labor market could present a complex policy challenge. Concerns about financial stability also surfaced, with several members expressing discomfort over high asset valuations.

The meeting discussion additionally addressed the potential impact of stablecoins. With the GENIUS Act now in effect, officials anticipate rapid growth in the use of payment-linked stablecoins. While this could enhance transaction efficiency, it may also increase demand for reserve assets like U.S. Treasuries. Fed members stressed the importance of monitoring the composition of stablecoin reserves and their potential to transmit financial risks, given their implications for banking systems and monetary policy execution.

Prior to the release of the minutes, the CME FedWatch Tool indicated an 85% likelihood of a 25-basis-point rate cut at the September meeting. The Fed has kept rates unchanged throughout 2025. Following the publication, Fed Chair Jerome Powell was scheduled to deliver a keynote address at the annual central bank symposium in Jackson Hole, Wyoming. This marks his final appearance at the event during his tenure. Market participants are closely watching to see whether Powell will shift toward a more employment-focused approach or maintain a firm stance on inflation.

Since returning to office, President Trump has repeatedly criticized the Fed’s reluctance to lower rates, often targeting Powell in public statements. Earlier this month, a sudden resignation by a sitting governor provided Trump with an opportunity to nominate a replacement. Stephen Milan, Chair of the White House Council of Economic Advisers, has been put forward to fill the vacancy left by Governor Kugler, whose term ends in January. However, Senate confirmation before the September meeting remains uncertain. On Wednesday, Trump publicly called for the resignation of Fed Governor Lisa Cook, accusing her of mortgage fraud involving properties located in Georgia and Michigan.