The Federal Reserve decided to keep interest rates steady within the range of 4.25% – 4.50%, with unanimous agreement among members for the fourth consecutive meeting, based on the assessment that monetary policy remains sufficiently restrictive.
The minutes indicated that a small minority within the Committee supports a rate cut in the upcoming July meeting, provided that incoming data shows clear signs of economic slowdown. Meanwhile, the majority preferred to wait, seeking confirmation of continued declines in inflation and activity.
The dot plot, which reflects policymakers' individual projections, revealed expectations of two gradual rate cuts during 2025, likely in September and December.
Core inflation, measured by the Core PCE index, remains around 2.6% year-over-year, which is above the Fed’s 2% target — indicating that price pressures persist, albeit at a slower pace.
Members warned that the new tariffs proposed by the U.S. administration could reignite inflation, prompting the need for additional caution before moving toward policy easing.
The minutes confirmed that the labor market remains resilient, with unemployment hovering near 4.2%, although there are early signs of slowing job growth and wage momentum, raising concerns of a possible uptick in unemployment.
The Committee decided to maintain its current pace of quantitative tightening, reducing its holdings by up to $5 billion in Treasuries and $35 billion in mortgage-backed securities (MBS) each month.
The Fed’s research team noted that the U.S. economy is showing signs of moderate recovery in the second quarter, following a slight contraction in the first quarter. The expected annual growth for 2025 is around 1.4%.
Some participants believe that the real interest rate is now approaching “neutral” territory, suggesting that any upcoming rate cuts would be limited and technical, rather than a signal of broader economic stimulus.
The minutes also highlighted that improving financial conditions—such as rising stock markets and narrowing credit spreads—could complicate efforts to bring down inflation and weaken the effectiveness of restrictive policy.
The Committee stressed that the future path of interest rates will remain data-dependent, particularly awaiting the upcoming Consumer Price Index (CPI) release on July 15 and the PCE report due at the end of the month.
