Fed minutes reveal sharp split over signaling near-term rate cuts

Federal Reserve policymakers held interest rates steady at their late April meeting, but newly released minutes show a sharp divide over whether to hint that cuts could come next.

The minutes, released Wednesday, show the Federal Open Market Committee voted 8-4 at its April 28-29 meeting to keep the federal funds rate unchanged at 3.50% to 3.75%. But the split went beyond the decision to hold rates. According to the April 28-29 FOMC minutes, “Voting against this action: Stephen I. Miran, who preferred to lower the target range … and Beth M. Hammack, Neel Kashkari, and Lorie K. Logan, who supported maintaining the target range … but did not support inclusion of an easing bias in the statement at this time.”

Voting for the action were Chair Jerome H. Powell, John C. Williams, Michael S. Barr, Michelle W. Bowman, Lisa D. Cook, Philip N. Jefferson, Anna Paulson and Christopher J. Waller. The dissents underscored a committee pulled in two directions: one member wanted an immediate quarter-point cut, while three others opposed language that signaled openness to easing later if conditions warranted.

Fed minutes are the central bank’s more detailed account of policymakers’ discussions, released weeks after a rate decision. They often offer a clearer picture of internal disagreements and how officials are balancing their twin concerns of inflation and employment. In this case, the minutes showed officials still grappling with an economy that was growing but facing persistent price pressures.

As the April 28-29 FOMC minutes put it: “Recent indicators suggest that economic activity has been expanding at a solid pace. Job gains have remained low, on average, and the unemployment rate has been little changed in recent months. Inflation is elevated, in part reflecting the recent increase in global energy prices.” The minutes also said the Middle East conflict had added uncertainty to the outlook and raised upside risks to inflation, helping explain why support for signaling near-term cuts was limited even as some policymakers wanted to keep that option visible.

That matters well beyond Washington. The Fed’s rate path affects borrowing costs across the economy, including mortgages, credit cards, business loans and other financing. The minutes suggest inflation concerns — especially energy-related price pressure — were still constraining any broader shift toward lower rates.

The statement issued after the meeting said, “The Committee will carefully assess incoming data, the evolving outlook, and the balance of risks” when considering future policy changes. That language became a fault line inside the committee, with some officials willing to preserve flexibility and others resisting any wording that could be read as tilting toward cuts while inflation remained too high.

Since the meeting, fresh data have kept that debate alive, though those numbers were not available to policymakers in late April. The Labor Department’s April consumer price index report, released May 12, showed headline inflation rising 0.6% from the prior month and 3.8% from a year earlier. The April employment report showed nonfarm payrolls increased by 115,000 and the unemployment rate was 4.3%, pointing to a labor market that is still growing but moderating.

The Fed’s next policy meeting is scheduled for June 16-17.