Key takeaways from the FOMC Minutes for the June 17–18, 2025 meeting:

• Economic Activity: The economy expanded solidly in Q2 after a slight Q1 contraction. Consumer spending and business investment remained firm, though sentiment was subdued. Labor markets were stable with unemployment at 4.2%. Real GDP projections were revised higher, mainly due to lower assumed tariff rates.
• Inflation: Headline PCE inflation was 2.3% YoY in May; core PCE was 2.6%. Inflation has eased from 2022 peaks but remains somewhat elevated. Tariffs are expected to put modest upward pressure on inflation, though uncertainty surrounds their timing and magnitude.
• Monetary Policy Outlook:
  • All participants supported keeping the federal funds rate at 4.25–4.50%.
  • Most participants viewed some rate cuts in H2 2025 as likely appropriate if inflation continues to ease and labor markets remain stable.
  • A minority favored no cuts in 2025, citing elevated inflation and upside risks.
  • The Committee reaffirmed a data-dependent and cautious stance given persistent risks.
• Risks and Uncertainty:
  • Uncertainty around tariffs, fiscal policy, and geopolitics remains elevated, though less so than in April.
  • Inflation risks are still skewed to the upside; labor market risks are more balanced but could intensify if policy stays restrictive.
  • Participants emphasized the need to keep inflation expectations anchored, especially amid recent price shocks.
• Balance Sheet and Market Functioning:
  • SOMA runoff continued, with securities holdings down ~$2.25T since June 2022.
  • Liquidity remains ample, but rebuilding of the Treasury General Account post-debt ceiling could drain reserves.
  • Repo facility operations were expanded to include morning sessions.
• Overall, the FOMC is signaling patience with current policy while preparing to pivot if inflation continues to moderate and labor markets soften. The path of tariffs remains a key variable for future policy decisions.