New Insights from the Fed’s Meeting Minutes: Market Expects Rate Cuts
Minutes from the Federal Open Market Committee’s June 17–18 meeting show policymakers content to hold their fire—for now. The Fed kept its benchmark federal-funds range at 4¼–4½ percent and left both the interest rate on reserve balances (4.4 percent) and the primary-credit rate (4.5 percent) untouched. Officials insisted that “recent indicators suggest that economic activity has continued to expand at a solid pace,” while noting unemployment “remains low.” The unanimity—12 votes, zero dissents—offered a veneer of calm, yet bullion traders weren’t lulled: spot gold tagged $3,316 an ounce on Wednesday as investors continued hunting for hard assets.
Beneath the placid surface, the numbers still nag. Headline Personal Consumption Expenditures (PCE) inflation ran 2.3 percent year-over-year in May, with the stickier core gauge at 2.6 percent—better than early-2025 but stubbornly above the Fed’s 2 percent objective. Joblessness held at 4.2 percent, and payroll growth even ticked a bit higher, prompting officials to conclude the labor market sits “at or near maximum employment.” In other words, the central bank believes it has breathing room. Whether that confidence is warranted is another matter, especially for households watching grocery bills rise faster than the CPI scoreboard admits.
Wall Street is already peering around the corner. The New York Fed’s June Survey of Market Expectations penciled in two quarter-point cuts before year-end and two more in 2026, even as futures markets still flag sizable growth risks. Minutes revealed “most participants” favoring “some reduction” in rates later this year—provided inflation keeps gliding lower—while “some others” want to stay put all the way through December. The biggest swing factor may be trade policy: April’s tariff volley, partly rolled back in May, shrank policy uncertainty for the moment, yet officials cautioned that another escalation could “lift inflation and curb hiring” in a hurry.
The balance-sheet drawdown quietly grinds on. Since June 2022 the System Open Market Account (SOMA) has slimmed by roughly $2¼ trillion, and street estimates see runoff ending in February 2026 with holdings near $6.2 trillion—still close to 20 percent of GDP. To keep money markets from seizing, the New York Fed introduced daily morning standing-repo operations on June 26. Even so, nominal Treasury yields climbed 15–20 basis points over the inter-meeting period, while the dollar slipped as global investors marked down U.S. growth prospects. One-year inflation breakevens dipped, but short-term expectations among households remain “elevated,” the minutes cautioned.
For now the central bank’s compass points to caution, not capitulation. But with tariffs, budget politics, and a $6-trillion Fed portfolio all lurking, the path ahead is anything but settled—and hard-asset bulls know it.
