Fed minutes: Most officials worried about inflation moving higher
[August 21, 2025] By
CHRISTOPHER RUGABER
WASHINGTON (AP) — Most Federal Reserve officials said last month that
the threat of higher inflation was a greater concern than the potential
for job losses, leading the central bank to keep its key rate unchanged.
According to the minutes of the July 29-30 meeting, released Wednesday,
members of the Fed's interest-rate setting committee “assessed that the
effects of higher tariffs had become more apparent in the prices of some
goods but that their overall effects on economic activity and inflation
remained to be seen.”
The minutes underscored the reluctance among the majority of the Fed's
19 policymakers to reduce the central bank's short-term interest rate
until they get a clearer sense of the impact of President Donald Trump's
sweeping tariffs on inflation. So far inflation has crept up in the past
couple of months but hasn't risen as much as many economists feared when
Trump unveiled some of his duties.
The policymakers appeared to spend a substantial amount of time
discussing the tariffs, and they said they expected inflation to
increase in the coming months as a result. But they also "judged that
considerable uncertainty remained about the timing, magnitude, and
persistence of the effects of this year’s increase in tariffs.”
Last month's meeting occurred two days before the government issued a
disappointing jobs report for July, which showed that hiring was weak
last month and far fewer jobs were added in May and June than originally
estimated. Wall Street investors increased their bets that the Fed would
cut rates at its next meeting Sept. 16-17 after that report was
released, according to futures pricing.
The Fed left its key interest rate unchanged last month at about 4.3%,
though two members of its governing board dissented in favor of a rate
cut. Both dissenters — Christopher Waller and Michelle Bowman — were
appointed to the board during Trump's first term.
At a news conference after the meeting, Chair Jerome Powell signaled
that it might take significant additional time for the Fed to determine
whether Trump's sweeping tariffs are boosting inflation.
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 Powell will speak for the first time
after the disappointing jobs report on Friday, at the Fed's annual
economic symposium in Jackson, Wyoming. Economists generally expect
he may signal that the Fed is likely to reduce rates this year
without committing to a reduction in September.
Earlier Wednesday, Trump urged Fed governor Lisa Cook, an appointee
of former president Joe Biden, to resign after an administration
official accused Cook of committing mortgage fraud. It represented
another effort by the Trump administration to gain control over the
Fed, a traditionally independent institution that has been targeted
by the White House because of its reluctance to cut its key rate,
which Trump has repeatedly demanded.
When the Fed changes its rate, it often — though not always —
affects borrowing costs for mortgages, auto loans, and credit cards.
The Fed typically keeps its rate high, or raises it, to cool
borrowing and spending and combat inflation. It often cuts its rate
to bolster the economy and hiring when growth is cooling.
According to the minutes, a few Fed officials at last month's
meeting “observed that evidence so far suggested that foreign
exporters were paying at most a modest part of the increased
tariffs, implying that domestic businesses and consumers were
predominantly bearing the tariff costs.”
And several policymakers “expected that many companies would
increasingly have to pass through tariff costs to end-customers over
time.”
Still, a few officials also insisted that the tariffs would likely
lead to a one-time increase in prices, rather than an ongoing bout
of inflation. Waller and Bowman have expressed that view and argued
that as a result, the Fed should cut rates because inflation —
excluding the tariffs — is cooling.
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