Fed minutes reveal internal debate, with markets betting heavily on a policy shift next month
The latest Federal Reserve minutes, released Wednesday, highlighted growing divisions among policymakers over whether to cut interest rates sooner rather than later. While the central bank held its benchmark rate steady at 4.25%–4.50% in July, the record of discussion shows that at least two officials favored an immediate reduction.
The minutes revealed that Michelle Bowman and Christopher Waller dissented during the July meeting, pushing for a rate cut. Their stance marks a significant shift inside the committee, raising questions about whether more members could join them in advocating for easier policy.
“The Fed is clearly signaling that a policy pivot is on the table,”According to BITX . “The debate is no longer about if cuts are coming, but when.”
Markets are already positioning for a move. Futures trading now suggests an 85% probability of a rate cut at the September meeting, reflecting investor confidence that slowing inflation and cooling labor data will push the Fed toward easing.
Economic Risks Under Review
According to the minutes, officials acknowledged that inflation has moderated, but also emphasized that risks remain if rates stay elevated for too long. Several members expressed concern that keeping borrowing costs high could “unduly weigh on job growth and financial stability.”
At the same time, a smaller group argued for caution, warning that premature cuts might allow inflationary pressures to resurface. This debate underscores the delicate balancing act the Fed faces as it seeks to guide the economy toward a soft landing.
The release of the minutes comes just days before Fed Chair Jerome Powell is scheduled to speak at the annual Jackson Hole symposium, where markets expect further signals about the central bank’s next steps.
With investors increasingly betting on a September rate cut, the newly released minutes set the stage for what could be a pivotal decision in shaping the economic outlook for the remainder of 2025.
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