Fed Minutes Reveal Rare Split on Interest Rates Amid Inflation Pressures and Weak Job Growth
The minutes of the U.S. Federal Reserve’s July 29–30 meeting, released on Wednesday, revealed a rare internal split not seen since 1993 over the direction of interest rates. While most policymakers agreed to keep the federal funds rate unchanged within the 4.25%–4.50% range, two members—Michelle Bowman, Vice Chair for Supervision, and Governor Christopher Waller—voted against the decision, preferring a quarter-point rate cut to guard against mounting weakness in the labor market.
This marked the first time in over three decades that more than one Fed official dissented on a rate decision. Their concerns were seemingly validated just two days later when data from the Department of Labor showed a sharp slowdown in job creation, a rise in unemployment, and labor force participation falling to its lowest level since late 2022. A historical revision of employment figures further erased more than a quarter of a million jobs previously thought to have been created in May and June, undermining the narrative of a resilient labor market. The revisions sparked anger from President Donald Trump, who responded by dismissing the head of the Bureau of Labor Statistics.
At the same time, inflationary risks re-emerged, driven in part by Trump’s tariffs. Core consumer prices rose faster than expected in July, followed by a surprise jump in producer prices, strengthening the case of Fed officials opposed to an early rate cut.
The minutes also highlighted ongoing debates within the Fed over the effects of tariffs on inflation. Several policymakers noted that the current federal funds rate may already be close to the “neutral level”—one that neither stimulates nor restrains economic activity. However, they cautioned that the central bank could face difficult policy choices ahead if inflation continues to climb while labor market conditions weaken further.
