Even if the Fed resumes rate cuts, the magnitude is unlikely to be significant…Minutes of June meeting released [Fed Watch]

The minutes of the monetary policy decision meeting of the Fed, held from the 17th to the 18th of last month, revealed that there were only a minority in support of lowering rates. The FOMC minutes, released on the 9th (local time), show that even if rate cuts resume, their scale is likely to be smaller than previously expected.

According to the minutes, released three weeks later, Fed officials assessed that the risks since May caused by tariffs had diminished compared to the previous meeting. In early May, when the Fed had its monetary policy meeting, there were notably high concerns about the aggressive direction of the tariff policy. Later, the Trump administration agreed with China in two high-level negotiations to defer tariffs exceeding 100% for 90 days, which alleviated much of that risk.

However, the fundamental stance has not changed much. Among meeting participants, more believed that the risk of inflation rises was greater than the risk of an economic slowdown. The minutes noted, "Some participants pointed out that tariffs would bring only a temporary price increase and would not affect longer-term inflation expectations, but most participants warned of risks that tariffs could have a more sustained impact."

In the end, the question is whether tariffs will result in only temporary inflation or whether they pose a longer-term inflation risk. And according to the minutes, in the June meeting, there was much more emphasis on the likelihood of persistent inflation.

There is also a minority view. The minutes, using the anonymous term "some participants," stated that if data decline as expected, a rate cut could be considered at the next July meeting. These some participants are presumed to be Michelle Bowman, Vice Chair for Supervision, and Christopher Waller, Board Member, who had previously openly remarked that the timing of rate cuts could be moved up.

President Trump continues to press for rapid rate cuts. Today, again on Truth Social, he claimed that the rate is at least 3 percentage points too high. Previously, he mentioned 2 percentage points, and the gap continues to widen. He also reiterated that whoever becomes Chair should be someone willing to lower rates. He further claimed that by not lowering rates, the U.S. is paying $360 billion per year in refinancing costs.

Currently, the market’s attention is focused on next week's inflation data release. While the impact of tariffs has yet to be immediately reflected and stock prices are trending upward, there are still significant concerns about an economic slowdown. Data released in the coming weeks are expected to greatly affect the Fed's policy course and the trajectory of the stock market.

Washington=Lee Sang-eun, Correspondent selee@hankyung.com