Federal Reserve officials expressed diverging views at their July policy meeting, with two governors dissenting from the decision to leave interest rates unchanged, minutes from the meeting released on Wednesday showed.
The Federal Open Market Committee (FOMC) voted to keep its benchmark federal funds rate in the 4.25%–4.5% range, where it has remained since December 2024.
Governors Michelle Bowman and Christopher Waller opposed the decision, arguing instead for a quarter-point cut to cushion what they saw as growing risks to employment.
It was the first time in more than three decades that multiple governors dissented from a rate decision.
The minutes highlighted a central debate within the Fed: whether inflation or labor market weakness poses the greater risk. “Participants generally pointed to risks to both sides of the Committee’s dual mandate, emphasizing upside risk to inflation and downside risk to employment,” according to the minutes.
A majority of officials judged inflation risks as more pressing, while “a couple” viewed labor market deterioration as the greater concern.
Tariffs introduced by President Donald Trump featured prominently in the discussions, with policymakers warning about their potential to drive up prices. “Regarding upside risks to inflation, participants pointed to the uncertain effects of tariffs and the possibility of inflation expectations becoming unanchored,” the minutes said.
Fed staff also described economic growth as “tepid” in the first half of 2025, with consumer spending slowing.
While unemployment remained low, several participants pointed to early signs of labor market weakening. The meeting came just before government data showed payroll growth in July remained soft and earlier months’ job gains were revised sharply lower.
“Participants noted that the Committee might face difficult tradeoffs if elevated inflation proved to be more persistent while the outlook for the labor market weakened,” per the minutes.
Future policy decisions, they emphasized, would depend on how incoming data shaped the balance of risks.
The release of the minutes comes ahead of Fed Chair Jerome Powell’s keynote address Friday at the central bank’s annual Jackson Hole symposium. Investors will be watching closely for clues on whether the Fed is preparing to shift toward easing policy or remain on hold until inflation risks subside.