Minutes from the Federal Reserve’s July meeting showed policymakers divided over when to begin cutting interest rates, underscoring the central bank’s cautious stance as inflation remains above target. According to the record, some officials argued that the Fed should wait for clearer evidence that price pressures are easing before lowering borrowing costs, citing persistent inflation data as a reason for patience.

The debate comes as the Fed continues to monitor progress on its 2% inflation goal. Core personal consumption expenditures, the central bank’s preferred inflation gauge, is running at 2.6%, still above target and consistent with a gradual but incomplete cooling in price growth.

The minutes suggest that while the case for eventual rate cuts is gaining support, the timing remains uncertain. Traders, however, are increasingly confident that easing is near. Markets are now pricing in a roughly 90% chance of a rate cut at the Fed’s September meeting, reflecting expectations that policymakers may soon shift toward supporting growth.

Currency markets have already responded to the changing outlook, with the dollar weakening against major peers as investors anticipate lower U.S. interest rates. The Fed’s next move will likely depend on upcoming inflation and labor market data, which could either reinforce the case for patience or strengthen the argument for an early cut.

Dollar weakness

Fed Minutes Reveal Split Over Rate Cuts as Inflation Stays Sticky