Fed Minutes Reveal Governors’ Thought Process Behind July Rate Hold | SchiffGold
Three weeks after the Federal Open Market Committee opted to leave its target range unchanged at 4.25%–4.50%, fresh details from the July meeting shed light on why policymakers are growing uneasy even as they stay on hold. Minutes released Wednesday reveal officials wrestling with sticky price pressures, new tariffs, and a cooling labor market—all while the spot price of gold hovered near $3,349.
Nine voting members, including Chair Jerome Powell, backed the status quo, but Governors Michelle Bowman and Christopher Waller dissented, favoring a quarter-point cut. They argued that, stripping out temporary tariff effects, inflation is already near the 2 percent goal and that a small rate cut would ‘proactively hedge against further weakening in the economy.’ The majority, however, judged risks as tilted toward higher inflation and weaker employment, citing data that show foreign exporters passing almost none of the tariff burden back to U.S. firms and consumers. At the time, the consensus believed services prices were finally cooling, but officials fear new levies could light another inflationary fuse even as growth slows.
Staff projections paint a dour backdrop: real GDP growth is expected to decelerate enough for unemployment to top its “natural rate” later this year and remain elevated through 2027. Yet the same forecast sees headline inflation easing to just 2 percent by that year—an optimism that might impress spreadsheet modelers more than households grappling with higher grocery bills. Several participants also flagged “elevated asset valuation pressures” and the possibility of unrealized bank losses should long-term yields spike, a scenario that could bring déjà vu to anyone who remembers the last time rates were cut.
The committee nevertheless reaffirmed its plan to let up to $5 billion in Treasury notes and $35 billion in mortgage-backed securities roll off the balance sheet each month. At the same time, it authorized up to $500 billion in overnight repo operations at a 4.5 percent minimum bid, effectively promising a liquidity backstop if markets wobble. Some members warned that the newly enacted GENIUS Act—aimed at regulating payment stablecoins—may funnel even more demand into Treasuries, potentially complicating monetary control and squeezing traditional banks.
The Fed insists it can thread the needle, tamping down prices without breaking the economy. Given tariff headwinds, balance-sheet shrinkage, and a significant equity pull back on Wednesday, markets—and gold buyers—are hedging their bets.
Call 1-888-GOLD-160 and speak with a Precious Metals Specialist today!
