Fed minutes show policymakers remain concerned about inflation as they weigh rate cuts

Core Viewpoint - The Federal Reserve is committed to reducing inflation to its 2% target while anticipating further interest rate cuts due to concerns about the labor market and inflationary pressures from tariffs [1][8]. Monetary Policy Actions - The Federal Open Market Committee (FOMC) voted to lower the benchmark federal funds rate by 25 basis points to a range of 4% to 4.25%, marking the first rate cut in 2025 [2]. - The FOMC minutes indicate that most participants believe further easing of monetary policy will be appropriate over the remainder of the year, with expectations for additional 25-basis-point cuts in upcoming meetings [12]. Inflation Metrics - The consumer price index (CPI) rose by 2.9% year-over-year in August, while the personal consumption expenditure (PCE) index increased by 2.7% from the previous year, both higher than earlier in the year [3]. - A majority of FOMC participants expressed concerns about upside risks to inflation, citing potential persistence of inflation beyond current expectations due to tariffs and other factors [5][6]. Labor Market Concerns - Policymakers noted signs of a weakening labor market, including low hiring and firing rates, concentrated job gains in a few sectors, and rising unemployment among vulnerable groups [9]. - The FOMC acknowledged that concerns about the labor market contributed to the decision to cut interest rates despite inflationary pressures [8]. Future Outlook - Fed Governor Stephen Miran was the only dissenting vote for a 50-basis-point cut, indicating a range of views among policymakers regarding future rate cuts [11]. - Market expectations suggest that the Fed may implement two more rate cuts this year, with a potential pause in January 2026 [13].