Federal Reserve officials, meeting in Washington last month, concluded that the combination of low unemployment and still-elevated inflation meant they should delay cutting interest rates, at least for now.
Not all of them agreed, underscoring the challenge for Jerome H. Powell, the Fed’s chair, to forge a consensus across policymakers at forthcoming meetings.
A record of the central bank’s July 29-30 meeting, released Wednesday, showed a divided Fed grappling with conflicting signals from the economic data, and how to respond to them.
Policymakers “generally expected inflation to increase in the near term,” the minutes showed, but they disagreed about whether that would be a short-term increase as companies passed along the cost of tariffs, or could morph into a more persistent problem. They agreed that job growth has slowed, but not about what that slowdown meant for the economy. Most important, they were divided about how to weigh the conflicting risks of higher inflation and rising joblessness.
“A majority of participants judged the upside risk to inflation as the greater of these two risks,” the minutes showed, “while several participants viewed the two risks as roughly balanced, and a couple of participants considered downside risk to employment the more salient risk.”
Ultimately, policymakers decided to hold rates steady for the fifth meeting in a row. But it was one of the most hotly contested monetary policy votes in decades, with two members of the Board of Governors officially opposing the decision to hold borrowing costs steady. It was the first double dissent on such a vote from policymakers of that rank since 1993.
The meeting took place amid intense pressure from President Donald Trump to cut interest rates, despite laws that are meant to insulate the central bank from political influence. Trump has repeatedly threatened to fire Powell and has seized on cost overruns in the central bank’s headquarters-renovation project as a potential pretext for doing so.
On Wednesday, Trump started a new assault, this time targeting Lisa Cook, a Fed governor. He called on her to resign after Bill Pulte, the director of the Federal Housing Finance Agency, said on social media that his office had investigated Cook and found that she appeared to have falsified bank documents to obtain favorable loan terms. Cook released a statement Wednesday evening saying she had “no intention of being bullied to step down.”
Powell and other Fed officials have tried to project an appearance of normalcy amid the attacks, emphasizing that their policy decisions will depend on the state of the economy, not political pressure. The minutes of the July meeting contain no reference to Trump’s threats.
Instead, the debate inside the central bank focused on questions related to inflation and the labor market. Most Fed officials are wary of cutting interest rates too soon because inflation remains above their long-run target of 2%, and it is likely to rise further as a result of Trump’s tariffs. They worry that another sharp rise in prices, so soon after the surge that followed the COVID-19 pandemic, could lead consumers and businesses to begin expecting faster inflation in the future, making it more difficult for policymakers to bring it fully under control.
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