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Highlights
- The FOMC meeting minutes reveal an apprehension by the Federal Reserve over the Trump tariffs.
- A strengthening job market and new tariffs issued have dampened optimism for a Fed rate cut in July.
- Trump is amplifying calls for rate cuts blaming the Fed for costing the US steep economic losses.
The recently released FOMC minutes reveal a cautious stance by the Federal Reserve as global trade tensions reach a fervent pitch. Participants say Trump tariffs are triggering new inflationary concerns, requiring a tentative approach toward interest rate cuts.
FOMC Minutes Reveal Inflationary Fears
The Federal Reserve has released the minutes of the last FOMC meeting, shedding insights into its policy decision to keep interest rates steady. According to the document, the Fed disclosed that it kept a keen eye on national economic indicators and paid particular attention to macroeconomic developments.
Right off the bat, the minutes indicated a consensus on falling inflation metrics in recent months, with projections coming in lower than expected. However, participants say heightened Trump tariffs are “likely to put upward pressure on prices,” urging a cautious approach toward rate cuts.
Despite the inflationary concerns, participants are uncertain over the timeline of tariff-induced inflation. Amid the raging debate, the minutes reveal that participant agree that signing of trade deals will limit the effect of tariff-related inflation.
Recently, Trump has sent trade letters imposing tariffs on a handful of countries including Iraq, Algeria, and Sri Lanka. The new tariff skirmishes are contributing to waning enthusiasm of a rate cut at the next FOMC meeting.
Trump Defends Tariffs Amid Dwindling Hopes For Rate Cuts
Donald Trump has hit back at claims that his tariffs are stoking inflationary concerns for the US economy. The US President cited a study from the Council of Economic Advisers (CEA) revealing that tariffs had no impact on inflation contrary to reports.
Despite Trump’s spirited defense, a strong US job data has sent the hopes of a rate cut in July tumbling to new lows. At the moment, the odds for the Fed to keep interest rates between 425 – 450 bps stands at 93.3%. Hopes for rate cuts below the level have slumped to 6.7% from last week’s highs of 23%.
Trump is pushing for a 300-basis-points rate cut, arguing that Fed Chair Jerome Powell’s delay is costing the US a fortune in refinancing costs.
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