The Fed’s July minutes show a central bank divided and traders are paying close attention. Some policymakers want to start cutting, worried about cracks in the labor market. Others remain focused on sticky inflation and the risks of Trump’s tariff storm.
Here’s what you need to know so far:
1. A Rare Split Vote
🗒️ #FOMC Minutes:
Bowman and Waller's dissents did not include a weak labor market which suggests they might actually be in favor of a 50 bps cut in September given the bad July employment data.
— #MTS Insights (#@MTSInsights)
6:08 PM • Aug 20, 2025
For the first time in more than 30 years, two Fed governors, Christopher Waller and Michelle Bowman, voted against holding rates steady. They wanted cuts, signaling real concern that the jobs slowdown could get worse without policy support. The rest of the committee chose patience, keeping the fed funds rate pinned at 4.25–4.5%.
2. Tariffs Cloud the Inflation Picture
Trump’s trade war loomed large over the discussion. Officials admitted they don’t fully know how tariffs will filter into prices, whether through higher import costs, disrupted supply chains, or shifting expectations. That uncertainty left most members leaning toward inflation risks as their top concern.
3. Cracks in the Jobs Market
Even before the weak July payrolls report (and downward revisions to prior months), Fed members were flagging trouble in the labor market. Slower consumer spending, softer hiring, and early signs of job market weakness raised alarms. The minutes noted that “downside risk to employment had meaningfully increased.”
4. Politics Turn Up the Heat
Trump continues to pressure Powell and the Fed, blasting them on social media and demanding faster rate cuts. On top of that, the White House will soon appoint another Fed governor after Adriana Kugler’s resignation. Traders know politics and policy are colliding, adding uncertainty ahead of Powell’s keynote at Jackson Hole this week.
Here’s the Takeaway
The Fed is walking a tightrope. Inflation risks tied to tariffs are keeping some officials cautious, while others see the labor market deteriorating faster than expected. With Trump turning up the heat and Powell set to speak at Jackson Hole, markets could get fresh clues on whether rate cuts are finally coming, or whether the Fed stays on pause.