Even if Fed resumes rate cuts, the scale may not be large... June minutes released [Fed Watch]

The minutes from the Fed's monetary policy decision meeting held from the 17th to the 18th of last month revealed that opinions supporting a rate cut were in the minority. The FOMC minutes, released on the 9th (local time), showed that even if rate cuts resume, the reduction is likely to be smaller than previously expected.

According to the minutes released three weeks later, Fed officials evaluated that the risks from tariffs had decreased compared to their meeting in May. At the beginning of May, Fed officials were very concerned that the tariff policy was proceeding more aggressively than expected when they had their monetary policy meeting. Later, after President Trump’s administration agreed to a 90-day postponement of tariffs over 100% through two rounds of high-level negotiations with China, they agreed that related risks had eased considerably.

However, the fundamental stance did not change much. More of the meeting's participants still thought inflation risks outweighed concerns about an economic slowdown. The minutes stated, “Some participants noted that tariffs would only cause a temporary increase in prices and would not affect long-term inflation expectations, but most participants mentioned the risk that tariffs could have a more sustained impact.”

Ultimately, the key issue is whether tariffs will only cause temporary inflation or whether they carry ongoing inflation risks. According to the minutes, during the June meeting, concerns about persistent inflation were much greater.

There is a minority as well. The minutes include the anonymous phrase “some participants,” who reportedly said that if the data declines as expected, a rate cut could be considered at the July meeting. The participants referred to are presumed to be Vice Chair for Supervision Michelle Bowman and Board Member Christopher Waller, who had previously made public remarks that the timing of a rate cut could be brought forward.

President Trump has continued to urge a quick rate cut. Today, he again claimed on Truth Social that the rate is at least 3 percentage points too high. Previously, he'd been talking about 2 percentage points, so the figure is growing. He also repeated his opinion that only someone who will lower rates should be the Chair. He further argued that, by not cutting rates, the US is incurring annual refinancing costs of $360 billion.

The market’s current focus is on next week’s release of inflation data. Although the stock market is trending up as the impact of tariffs is not yet immediately apparent, concerns about an economic slowdown remain large. Data to be released over the next few weeks is expected to significantly affect the Fed’s actions and the direction of the stock market.

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