The minutes of the Federal Reserve's latest monetary policy meeting revealed most officials still see the upside risk to inflation as the bigger threat to the economic outlook, although a couple were more worried about the downside risk to employment.
While the Fed announced its widely expected decision to leave interest rates following the July 29-30 meeting, Governors Christopher Waller and Michelle Bowman preferred to lower rates by 25 basis points.
The minutes, released Wednesday afternoon, revealed Waller and Bowman judged inflation was running close to the Fed's 2 percent objective excluding tariff effects and that higher tariffs were unlikely to have persistent effects on inflation.
"Furthermore, they assessed that downside risk to employment had meaningfully increased with the slowing of the growth of economic activity and consumer spending, and that some incoming data pointed to a weakening of labor market conditions," the Fed said.
The minutes revealed Bowman also expressed her view that taking action to begin moving the policy rate at a gradual pace toward its neutral level would have proactively hedged against a further weakening in the economy and the risk of damage to the labor market.
With regard to the outlook for rates, the Fed said almost all participants agreed that the Fed was well positioned to respond in a timely way to potential economic developments.
Participants also agreed that monetary policy would be informed by a wide range of incoming data, the economic outlook, and the balance of risks, the Fed said.
The minutes said participants noted that it would take time to have more clarity on the magnitude and persistence of higher tariffs' effects on inflation.
"Even so, some participants emphasized that a great deal could be learned in coming months from incoming data, helping to inform their assessment of the balance of risks and the appropriate setting of the federal funds rate," the Fed said.
The central bank said, "At the same time, some noted that it would not be feasible or appropriate to wait for complete clarity on the tariffs' effects on inflation before adjusting the stance of monetary policy."
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