U.S. FOMC Meeting Minutes (July 29-30, 2025)

Minutes Show the FOMC Remained Uncertain About Tariffs Passthrough and the Labor Market Slack in July

• The Federal Reserve Open Market Committee (FOMC) kept the federal funds rate unchanged in the target range of 4.25% to 4.50% at its last meeting in July. This decision was made prior to July's payrolls and CPI reports, which revealed a notable softening in the labor market as well as some evidence of strengthening core inflation. 
• Despite this, today's minutes showed that even prior to this data, FOMC participants were citing evidence of tariff passthrough to consumer prices as well as a softening labor market demand. They also remained concerned on the impact tariffs could be having on inflation expectations.
• The staff economic outlook in July – not to be confused with the Summary of Economic Projections – was little changed relative to June. Real GDP growth through 2027 was little changed from the June meeting. The minutes noted that uncertainty remained elevated and risks to economic activity remained skewed to the downside, while inflation risks were skewed to the upside. 
• In their extensive discussion of inflation and tariff passthrough, FOMC participants noted that inflation remains elevated and tariffs effects were becoming more apparent in the data (comments made even prior the latest July's report). Still, the minutes noted that there remains considerable uncertainty about the timing, magnitude, and persistence on tariff effects. Many participants noted that for various reasons it could take some time for the full effect of higher tariffs to be felt. However, participants felt that despite the delay, companies would increasingly have to pass-on higher costs consumers over time. 
• Nine of the eleven FOMC members in attendance agreed to maintain the target range for the federal funds rate at 4¼ to 4½ percent, while two members voted against the decision.

Key Implications

• During FOMC's last interest rate decision, two FOMC members – Waller and Bowman –dissented and instead opted for a rate reduction. This development, combined with the disappointing July's payroll report, has fueled hopes for a rate cut in September. However, last week 's Fed speakers have pushed back on the notion that a September cut was a slam-dunk. Chicago Fed President Goolsbee – a voting FOMC member – noted the uptick in services inflation as "concerning" while also emphasizing the importance of remaining cautious on assuming tariffs as a one-time inflation shock. Importantly, he was also quite upbeat on the labor market, characterizing it as "solid" and attributing the recent cooling in payroll growth to a tightening in immigration. 
• There's one more employment and CPI report before the next FOMC meeting. Downside risks to the labor market have increased since the last employment report, and while tariffs are beginning to have some impact on goods prices, the passthrough has been more moderate than expected. Should this trend continue to play out, it would likely prompt the Fed to prioritize the employment side of its dual mandate and provide some interest rate relief for the economy. Chair Powell will speak this Friday at the Jackson Hole Economic Symposium. Market participants will closely watch this speech to see if there's any shift in tone towards a September rate cut.

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