Federal Reserve July 2025 FOMC Meeting: Inflation, Jobs, Rates & Risks

On Wednesday, the Federal Reserve released the minutes of its July 29-30, 2025, Federal Open Market Committee (FOMC) meeting, which provided the latest information on the economic situation in the U.S.

Led by Jerome Powell as the Chairman with John C. Williams as the Vice Chairman, the rest of the key members included Michael Barr, Michelle Bowman, Lisa Cook, Austan Goolsbee, Philip Jefferson, and Christopher Waller.

The Committee emphasized economic outlook, financial stability, and the direction of monetary policy. A lso indicated a continued reduction in the balance sheet, high financial risks, and possible future policy changes.

Source: Federal Reserve X

Notable Economic Outlook and Policy Decisions

• In the FOMC, significant improvement was observed in the monetary policy as lessons were taken from 2020.

• The steady policy rate expectations and the minimal change in Treasury yields. The markets were strong and equity prices increased due to optimism in large tech companies, and credit spreads narrowed.

• The expectations of inflation rose slightly, and the dollar was depreciating slowly. In money markets, repo rates were a touch higher as a result of Treasury bill issues and quarter-end pressures, and the Fed saw a record use of its standing repo facility.

• The Committee reported a projected slowdown in reserves as TGA was rebuilt and SOMA was run off, but reported generally smooth policy implementation.

• In FOMC, Real GDP growth was relatively low in the first half of 2025, with second-quarter growth also boosted by the sharp decline in imports after earlier stocking up in response to tariffs.

• Consumer spending was strong,  but investment slowed. With headline PCE inflation at 2.5% and core at 2.7% in June , the same as in the PY. Officials observed that disinflation has halted, and the tariffs are exerting upward pressure on the prices of goods.

• The labor market, with unemployment ticking down to 4.1% in June, and payroll gains are solid. Although there was a slowdown in private hiring. Wages increased 3.7% year-over-year, a little slower than in the previous year.

• Financial conditions have improved slightly, but borrowing costs are still high by post-crisis standards.

• In FOMC meeting, Corporate debt performance was weakened marginally, whereas the household debt remained low, about GDP. Nevertheless, private credit and leveraged finance weaknesses remained.

• Economic growth slowed around the world in the second quarter, with Canada contracting and China holding steady.

• Inflation in foreign countries was close to the target but still high in some economies. Other central banks, such as Mexico and Switzerland, nd eased policy, and others maintained it.

• In FOMC Meeting, Fed staff forecasted a weaker pace of the labor market, falling back to 2% by 2027.

• The risks on the downside to growth due to trade uncertainty. Risks with inflation, when looked at, are inclined towards the upper side.

• The July 29-30, 2025, FOMC minutes also indicate that inflation is slightly above the 2% target as goods prices accelerate due to tariffs, and services inflation decelerates.

• Participants anticipate that inflation will increase in the short term, but emphasized that there is great uncertainty regarding the effects of tariffs.

• Economic growth has decelerated and is burdened by slower consumption, housing, and investment, and policy uncertainty remains.

• Risks to financial stability are high asset prices and stablecoin expansion following the GENIUS Act.

• The Fed kept rates at 4.25% - 4.5% and is continuing to reduce the balance sheet, with a focus on flexibility as inflation and employment risks persist.

Conclusion

In the July 29-30, 2025, FOMC minutes, Fed officials note a strong labor market, ongoing tariff pressure, a Fed Rate Cut, and moderate economic growth.