According to the minutes of the Federal Reserve's policy meeting released early Thursday Beijing time, despite two officials opposing and advocating for rate cuts, the decision made last month to maintain interest rates was still widely supported.
The meeting minutes show that "almost all" officials supported the decision, meaning that aside from the two opposing officials, the remaining 16 participating officials expressed support.
This decision was made after the White House exerted strong political pressure on Fed Chairman Powell to cut rates. Officials decided to maintain the benchmark policy rate within the range of 4.25% to 4.5% after weighing how importers, retailers, and consumers would share the rising costs of import tariffs.
The minutes of the meeting were released three weeks later, as usual, showing that officials were divided on when they could be sure that rising import costs would not trigger broader, sustained price increases. Some officials stated that "a lot of information will be available in the coming months," while others felt that "adjusting monetary policy stance is neither realistic nor appropriate until the impact of tariffs on inflation is fully clarified."
At the meeting, officials expressed concern that the employment situation may deteriorate, but most believed that the risk of rising inflation is "the greater of the two risks."
Since that meeting, economic data has further reinforced the so-called "dovish view" that advocates for interest rate cuts due to the downward revision of employment growth data for May and June. Different interpretations of economic data have exacerbated divisions among rate setters in the following weeks.
Waller and Bowman, who voted against the Fed's decision to hold steady last month, believe that officials should not make decisions based on price increases triggered by tariffs, as such price increases are unlikely to recur.
A minority of officials have expressed support for Waller and Bowman’s position, suggesting that they may lean towards rate cuts at the Fed's next meeting on September 16-17. They noted that the transmission speed of tariff increases to consumer prices is lower than expected, which should alleviate market concerns about a new round of inflation shocks triggered by rising import costs.
However, inflation-focused hawks pointed out that price pressures have intensified since last month's meeting, including in the services sector. Kansas City Fed President George Smith stated in a speech last week that the impact of tariffs on inflation is limited, partly because the Fed has kept its policy unchanged.
Bowman began calculating inflation rates excluding tariffs, while unlike Bowman, Smith pledged never to attempt such a practice, calling it "meaningless and unmeasurable."
Before the release of the minutes, Trump called for Fed Governor Cook to resign after a Trump administration official accused her of mortgage fraud. Cook responded that she would not resign for this reason. She was appointed by former President Biden.
In recent weeks, allies of Trump have intensified pressure on Powell and other Fed leaders, demanding either rate cuts or their resignations. Last month, some hinted that Powell might have lied about ongoing renovation costs when testifying before Congress, but the Fed subsequently provided evidence indicating that the charge lacked basis. On July 11, a government official issued a statement suggesting that Powell's resignation was imminent, but did not provide any supporting evidence for this claim.
Another Biden-appointed Fed governor, Cook, has already resigned nearly six months ahead of schedule without stating the reason for her resignation. Trump has announced plans to appoint White House economic advisor Stephen Miran to fill the vacancy.
