Federal Reserve Officials Divided Over Interpreting Economic Data

During their meeting in Washington last month, Federal Reserve officials agreed that the combination of low unemployment and elevated inflation warranted postponing any interest rate cuts for the time being.

However, this consensus was not unanimous, highlighting the difficulty faced by Fed Chair Jerome H. Powell in uniting policymakers ahead of upcoming meetings.

Minutes from the Federal Reserve's July 29-30 gathering, released recently, show a divided group wrestling with contradictory economic data and debating the appropriate response.

The policymakers generally anticipated a near-term rise in inflation, but they differed on whether this increase would be temporary—driven by tariff-related costs—or if it might become a longer-lasting issue. While they agreed that job growth had slowed, opinions varied on the implications of this slowdown for the broader economy. Crucially, members were split on how to balance the risks of persistent inflation against those posed by rising unemployment.

According to the minutes, "A majority of participants viewed the risk of inflation accelerating as the more significant concern, whereas several saw the risks as roughly equal, and a few considered the potential for increased unemployment as the primary risk."

In the end, the Federal Reserve chose to maintain interest rates unchanged for the fifth consecutive meeting. Yet, the decision was one of the most contentious in decades, with two Board of Governors members formally dissenting against holding rates steady—marking the first instance of a double dissent at this level since 1993.