FOMC MINUTES: Almost all supported maintaining rates at 3.50-3.75%, while a couple preferred a 25bps cut, citing restrictive policy and labour market risks; some judged rates should be held steady for some time

Policy outlook & rate guidance

• Almost all supported maintaining 3.50-3.75%, while a couple preferred a 25bps cut, citing restrictive policy and labour market risks.
• Several said further rate cuts would likely be appropriate if inflation declines as expected.
• Some judged rates should be held steady for some time pending clearer disinflation evidence.
• A number judged further easing may not be warranted until clear evidence shows disinflation is firmly back on track.
• Several favoured two-sided guidance, noting upward adjustments could be appropriate if inflation remains above target.
• Vast majority saw downside employment risks as moderated, while inflation persistence risks remained; some judged risks more balanced.
• Several warned further easing amid elevated inflation could signal reduced commitment to 2% goal.
• A few cautioned overly restrictive policy could significantly weaken labour conditions.

Neutral rate & financial conditions

• Those favouring no change said, after 75bps of cuts last year, policy was within estimates of neutral.
• Most expected growth support from favourable financial conditions, fiscal policy, or regulatory changes.

Inflation views

• Inflation had eased markedly from 2022 highs but remained somewhat elevated relative to 2%.
• Elevated readings largely reflected core goods boosted by tariffs; some noted continued disinflation in core services, especially housing.
• Most cautioned progress toward 2% may be slower and uneven; risk of persistent above-target inflation seen as meaningful.
• Some cited business contacts planning price increases this year due to cost pressures, including tariffs.
• Several said sustained demand pressures could keep inflation elevated.
• Several expected ongoing housing services moderation to exert downward pressure on inflation.
• Several anticipated higher productivity growth would help restrain inflation.
• A few reported firms automating to offset costs, reducing need to raise prices or cut margins.
• Most longer-term inflation expectations remained consistent with 2%; several noted near-term expectations had declined from spring peaks.

Labour market & growth

• Most said unemployment, layoffs and vacancies suggested stabilisation after gradual cooling.
• Almost all observed layoffs remained low but hiring was also subdued.
• Several said contacts remained cautious on hiring amid outlook and AI uncertainty.
• Some cited lower net immigration as contributing to weak job gains.
• Vast majority judged stabilisation signs and diminished downside labour risks.
• Most nonetheless said downside labour risks remained, including sharp unemployment increases in a low-hiring environment.
• Some pointed to soft survey measures and part-time for economic reasons as signs of lingering weakness.
• Activity seen expanding at solid pace; consumer spending resilient, supported by household wealth.
• Several cited disparity between strong higher-income and soft lower-income consumer spending.
• Several noted robust business investment, particularly in technology; several judged productivity gains would support growth.

Agricultural commentary

• A couple said the crop sector remained weak, while livestock stayed strong.

USD:

• Minutes note that in the days leading up to the meeting, the dollar had depreciated markedly after reports that the Desk had made requests for indicative quotes, known as "rate checks," on the dollar–yen exchange rate; the remark was in the 'Developments in Financial Markets and Open Market Operations' section of the release.
• These rate checks were conducted solely on behalf of the US Treasury.
• There were no intervention operations in foreign currencies for the System's account during the intermeeting period.