Minutes of the Federal Open Market Committee_June 17–18, 2025

Group 1: Monetary Policy Review - The Federal Open Market Committee (FOMC) is reviewing its monetary policy framework, focusing on assessing risks and uncertainties that impact policy strategy and communication [3][4][5] - Participants emphasized the importance of effective communication regarding risks and uncertainty to enhance transparency and accountability in monetary policy decisions [5][6] - The Committee plans to continue discussions on enhancing communication tools after completing the review of its Statement on Longer-Run Goals and Monetary Policy Strategy [7] Group 2: Financial Market Developments - During the intermeeting period, policy expectations and Treasury yields rose modestly, while credit spreads narrowed and equity prices increased [8] - The median respondent's expectations for real GDP growth and personal consumption expenditures (PCE) inflation for 2025 showed some recovery from previous declines, although growth expectations remained lower than before April [8][9] - Nominal Treasury yields increased by 15 to 20 basis points, reflecting market participants' growing fiscal concerns [9][10] Group 3: Economic Situation - Consumer price inflation was estimated at 2.3% in May, with core PCE inflation at 2.6%, both lower than at the beginning of the year [19] - The unemployment rate remained low at 4.2% in May, with solid labor market conditions and a steady increase in nonfarm payrolls [20] - Real GDP was expanding at a solid pace in the second quarter, with indicators suggesting strong consumer spending and business investment [21][22] Group 4: International Trade and Economic Outlook - U.S. imports declined sharply in April following the introduction of tariffs, while exports firmed, leading to a rebound in trade flows [23] - Economic growth abroad picked up in the first quarter but showed signs of slowing in the second quarter due to lower exports to the U.S. and uncertainty in global trade policies [24] - Inflation abroad remained near central bank targets, with some countries experiencing renewed inflationary pressures [25][26] Group 5: Labor Market and Business Sector - Labor market conditions were solid, with participants noting a potential softening in hiring due to elevated uncertainty [47] - Business investment remained cautious, with firms proceeding with existing projects but hesitating to start new ones amid uncertainty [50] - Financing for larger investment projects was readily available, although some sectors, like agriculture, faced challenges from low crop prices and high input costs [50][33] Group 6: Monetary Policy Actions - The FOMC decided to maintain the target range for the federal funds rate at 4¼ to 4½ percent, assessing incoming data and the evolving economic outlook [57][62] - The Committee is committed to supporting maximum employment and returning inflation to its 2% objective while continuing to reduce its holdings of Treasury securities and agency debt [62][63] - Participants agreed to monitor the implications of incoming information for the economic outlook and adjust monetary policy as necessary [58]