Fed minutes show tariffs shaping inflation risk

Fed officials treat higher tariffs as a rising risk to inflation while keeping policy rates steady.

Fed minutes weigh tariffs on inflation as rates stay unchanged

Washington, AP — The minutes from the Federal Reserve’s July meeting show most policymakers viewed the threat of higher inflation as a bigger risk than the possibility of job losses, which helped the central bank hold its key rate at about 4.3 percent. They noted that higher tariffs have become more visible in the prices of some goods, but their overall impact on the economy and inflation remains unclear.

Two members dissented in favor of a rate cut, while Chair Jerome Powell signaled that it could take significant time to assess whether tariffs are nudging inflation higher. The minutes underscore the Fed’s caution as it waits for clearer data on how trade policy will feed into prices. The typical link between rate moves and borrowing costs remains in play, with the central bank mindful of a moving political and economic target in Washington.

The minutes reflect a policy stance built on patience in the face of a trade policy that could quietly lift inflation. Officials exchange a desire to see more price signals before easing, even as tariffs add a new layer of uncertainty to the inflation outlook. This is a reminder that monetary policy now operates in a wider policy arena where trade actions can complicate the reset path for rates.

For markets, the message is simple: data, not rhetoric, will decide the pace of any future moves. If tariffs persist in lifting prices, the Fed may keep rates higher longer or delay cuts, which could ripple through mortgages, auto loans, and business investment. The outcome hinges on how quickly inflation cools and how trade policy evolves.

Highlights

The path ahead will depend on data and the pace of trade policy changes.