FOMC MINUTES: Almost all supported keeping the federal funds target range at 3.50-3.75% at this meeting

Policy outlook & rate guidance

Almost all supported keeping the federal funds target range at 3.50-3.75% at this meeting.
Most said it was too early to judge how Middle East developments would affect the US economy and policy.
Many judged rate cuts would likely become appropriate over time if inflation declined as expected.
A couple said they had pushed the most likely timing of rate cuts further into the future after recent inflation readings.
Some saw a strong case for two-sided forward guidance, including possible rate rises if inflation stayed above target.
All agreed policy was not on a preset course and would be set meeting by meeting.
Most said a prolonged Middle East conflict could weaken labour markets enough to warrant additional rate cuts.
Many said persistently higher oil prices could keep inflation elevated long enough to justify rate rises.

Staff or dissent

One preferred a 25 basis point cut, citing a still-restrictive stance, weak labour demand and elevated downside labour-market risks.

Neutral rate & financial conditions

Almost all generally viewed the policy rate as within a range of plausible estimates of neutral.
Most expected 2026 growth to be supported by favourable financial conditions.

Inflation views

Some said further progress on disinflation had been absent in recent months.
Some said core goods inflation remained too high for sustainable achievement of the 2% objective, partly reflecting tariffs.
Several said most measures of longer-term inflation expectations remained consistent with the 2% objective.
Several said near-term inflation expectations had risen in recent weeks, reflecting higher oil prices.
Most expected tariffs’ effects on core goods prices to diminish this year, though the pace and timing had become more uncertain.
Several expected slowing housing services inflation to continue putting downward pressure on overall inflation.
Several expected stronger productivity growth from technology or deregulation to put downward pressure on inflation.
Some warned longer-term inflation expectations could become more sensitive to energy-price increases after years of above-target inflation.
The vast majority said progress back to 2% could be slower than previously expected and that risks of persistently above-target inflation had increased.

Labour market & growth

Most said labour-market data still suggested broad balance, with low job growth roughly matching slower labour-force growth.
Several highlighted possible labour-market softening, including higher prime-age unemployment, narrow job growth and weaker job-availability surveys.
Some said firms remained cautious on hiring because of near-term uncertainty and concerns about AI’s longer-term labour-market effects.
The majority expected unemployment to stay little changed, with low job creation and labour-force growth continuing.
A couple expected labour-market conditions to soften.
The vast majority judged employment risks were skewed to the downside.
Many warned that, with hiring already low, weaker labour demand could push unemployment up sharply.
Many said firms were likely to delay or reduce hiring in anticipation of AI adoption.
A few said AI-related lay-offs remained rare or that firms were using AI to augment rather than replace workers.
Most said a protracted Middle East conflict could weigh on sentiment and further reduce hiring.
Most expected 2026 GDP growth to remain solid, supported by AI-related investment, fiscal policy or regulatory changes.
Most warned recent Middle East developments had increased uncertainty and downside risks around growth.

Balance sheet & QT & liquidity

Several discussed balance-sheet and implementation issues, including how bank liquidity regulations affect reserve demand.
A couple discussed standing repo operations and supported further study of central clearing.

Housing market and real estate commentary

Some said housing services price increases had slowed markedly over the past year and were now close to their pre-pandemic pace.

Agricultural commentary

A couple said farmers were under strain from higher fuel and fertiliser prices linked to the Middle East conflict.

Fiscal commentary