Tariff Fears Grip the Federal Reserve

In a recent meeting, the Federal Reserve refrained from suggesting any cut in interest rates, emphasizing instead the looming threat posed by tariffs. With strong employment numbers and an inflation rate surpassing expectations, the released minutes of the meeting have garnered significant attention. As new inflation data is anticipated mid-month, what deeper insights do the Fed minutes provide?

What Do the Fed Minutes Unveil?

The Fed minutes reveal that multiple countries received tariff notifications from President Trump, indicating these actions are part of strategic negotiations. If Trump advances with his plans, the European Union could face similar tariffs next. The speculated three-week negotiation window now bears the weight of market hopes, given the inadequate progress over the past three months when tariffs led to notable market upheaval on April 2.

Although President Trump has cited studies claiming tariffs don’t contribute to inflation, Federal Reserve members have openly challenged this assertion. They assertively counter the president’s claim, denoting a clear division in views.

What Are the Essential Insights from the Fed Minutes?

The Federal Reserve minutes provide crucial insights, shedding light on the Fed’s position and economy’s trajectory:

• A minority within the Fed suggest the interest rate will not greatly surpass the neutral benchmark.
• Unanimous agreement was reached to keep the current interest rate range unchanged.
• Participants noted a reduction in inflation risks despite their persistent high levels.
• While tariff outcomes have lessened economic unpredictability, broader uncertainties continue to linger.
• A positive outlook was shared, anticipating better GDP growth for 2025 with lowered inflation estimation.
• Market analysts from the New York Fed foresee the Fed’s portfolio hitting $6.2 trillion, equating to roughly 20% of the GDP.
• Debate ensued regarding potential rate cuts in July, contingent on further economic indicators.
• Caution against short-term rate cuts in 2025 was advised by some due to persistent inflation and robust labor metrics.

The minutes underscore the crucial nature of reaching tariff accords. Remarks by Waller and other members spotlight potential July rate cut discussions, although strong employment figures and higher inflation spark debates on any pivot in policy. Trump’s hinted tariff hikes for August seem to have disturbed some members, overshadowing optimistic signals for market trends. Nevertheless, Bitcoin continues to grapple with resistance.