Most Federal Reserve officials judged rising inflation risks to be a greater concern than potential job losses, prompting a decision to hold the policy rate near 4.3%. Fed minutes noted that higher tariffs have become more apparent in some goods' prices while the overall effects on economic activity and inflation remain uncertain. The majority expressed reluctance to cut short-term rates until clearer evidence emerges on tariff-driven inflation. Inflation has edged up recently but not as sharply as some feared. Two board members dissented in favor of a cut, and the chair warned that more time is needed to assess tariff impacts.
WASHINGTON (AP) - Most Federal Reserve officials said last month that the threat of higher inflation was a greater concern than the potential for job losses, leading the central bank to keep its key rate unchanged. According to the minutes of the July 29-30 meeting, released Wednesday, members of the Fed's interest-rate setting committee "assessed that the effects of higher tariffs had become more apparent in the prices of some goods but that their overall effects on economic activity and inflation remained to be seen."
The minutes underscored the reluctance among the majority of the Fed's 19 policymakers to reduce the central bank's short-term interest rate until they get a clearer sense of the impact of President Donald Trump's sweeping tariffs on inflation. So far inflation has crept up in the past couple of months but hasn't risen as much as many economists feared when Trump unveiled some of his duties.
The Fed left its key interest rate unchanged last month at about 4.3%, though two members of its governing board dissented in favor of a rate cut. Both dissenters - Christopher Waller and Michelle Bowman - were appointed to the board during Trump's first term. At a news conference after the meeting, Chair Jerome Powell signaled that it might take significant additional time for the Fed to determine whether Trump's sweeping tariffs are boosting inflation.
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