U.S. Fed officials more concerned with inflation risk than jobs: minutes

President Donald Trump speaks as Federal Reserve Chairman Jerome Powell listens during a visit to the Federal Reserve, Thursday, July 24, 2025, in Washington. (AP Photo/Julia Demaree Nikhinson)

A majority of Federal Reserve officials found that risks surrounding U.S. inflation outweighed those to employment, minutes of a recent policy meeting showed -- underscoring a central bank divide over the effects of U.S. President Donald Trump’s tariffs.

Attendees of the late July meeting saw challenges to both sides of the Fed’s dual mandate of maintaining stable prices and maximum employment, as they mulled the right time for changes to interest rates, according to the minutes released Wednesday.

But “a majority of participants judged the upside risk to inflation as the greater of these two,” the report added.

Only “a couple of participants considered downside risk to employment the more salient” one.

This points to differences in the central bank’s rate-setting Federal Open Market Committee, which saw two dissents in July from Fed governors Christopher Waller and Michelle Bowman.

Overall, policymakers voted to keep interest rates unchanged at a range between 4.25 per cent and 4.50 per cent, despite Trump’s repeated calls for the independent central bank to slash rates.

But Waller and Bowman favored a cut of 25 basis points, with Bowman flagging a preference to hedge against further weakening in the economy and “the risk of damage to the labour market.”

The minutes showed Wednesday that a couple of officials preferred to lower interest rates, indicating that the two dissenters appear not to have been joined by others.

These policymakers judged that tariffs were unlikely to have persistent effects on price hikes, while flagging concern on labour market conditions.

Elsewhere, officials gauged that growth of economic activity cooled in the first half of this year, the minutes said.

Tariff effects “were becoming more apparent in the data, as indicated by recent increases in goods price inflation,” the minutes showed.

Several participants also noted that inflation exceeded the Fed’s two per cent target for a prolonged period. This raises the risk of longer-term inflation expectations “becoming unanchored,” particularly if higher tariffs have lingering effects on prices.

Many in the meeting also noted it could take time for the full effects of steeper duties to be felt in consumer costs.

“The labour market will be the swing factor on whether the Fed cuts interest rates in September or not,” said economist Ryan Sweet of Oxford Economics.

“It’s likely the August employment report and revisions will be the determining factor,” he added.

“Odds are rising that the Fed cuts sooner than we anticipate.”