FED Internal War

What the latest Fed meeting minutes showed us, what to expect going forward for interest rates and inflation.

Because yes, central bankers may disagree with each other, and politics may be interfering with the economy more than ever, but that doesn’t mean we can’t make the right decisions for our own portfolios.

WHAT WE LEARNED FROM THE FED MINUTES

First, the Fed kept rates steady at 4.25%–4.5%, for the fifth consecutive meeting. But here’s the key: two members publicly dissented and voted for a rate cut.

Specifically, they called for a 25 basis point cut. This is something we don’t often see. In fact, it’s the first time in 30 years that more than one member has dissented on a Fed decision!

What does this show? That disagreements inside the Fed are real and significant. Some see inflation as the biggest threat, while others believe risks to the labor market are more pressing. And this isn’t just theoretical—we’re already seeing signs of it in the macro data.

The U.S. is starting to show fatigue. July employment data came in weaker than expected, while May and June figures were revised downward. In other words, the labor market is slowing faster than we thought. That doesn’t go unnoticed by the Fed.

At the same time, the Fed is worried about something else: the new tariffs announced by Trump.

Tariffs may be a purely political tool, but they directly impact prices—and therefore inflation. Some inside the Fed think the impact will be temporary, while others fear they’ll fuel sticky inflation, disrupt supply chains, and cloud forecasts.

This is especially critical because the Fed operates based on forecasts, and when forecasts become muddled, decision-making becomes much harder.

To put it simply:

We may end up with inflation remaining above target, while unemployment rises and growth slows.

That scenario has a name: STAGFLATION. And yes, the Fed is now openly acknowledging that it can’t be ruled out.

WHAT TO EXPECT

So what does this mean for us as investors?

1. Rates won’t come down immediately.

The majority of the Fed still isn’t ready. But for the first time, there’s a serious minority pushing for it. So, a policy shift is closer than it seemed a few months ago. Maybe not tomorrow—but definitely not as far away as before.

1. Politics will play a role.

Trump is expected to push harder for cuts. He’s already criticizing Fed members and calling for resignations. That will have long-term implications for monetary policy.

1. Volatility is here to stay.

When even the Fed itself doesn’t know which risk is more urgent—inflation or recession—it’s clear: the environment is uncertain. And in times of uncertainty, a calm, disciplined investment strategy becomes even more valuable.

Posted Using INLEO