Fed Officials Signal Patience on Rate Path as Inflation Pressures Ease Unevenly
Minutes from the May meeting reveal a committee more divided than markets had priced; the median view now points to one cut at most this year.
Federal Reserve officials are growing increasingly cautious about the timing of rate reductions this year, according to minutes from the May meeting.
The minutes paint a picture of a central bank reluctant to ease prematurely after the false starts of 2023 and 2024. Foreign holders are responding — European pension funds have begun rotating out of duration.
Officials emphasized that services inflation and wage growth remain uneven, giving the committee little reason to validate the market's faster-cut narrative.
Traders pared back near-term easing bets after the release, while longer-dated Treasury demand softened as reserve managers waited for clearer guidance.
The discussion also showed a sharper split between members focused on labor-market cooling and those still worried that underlying inflation could stall above target.
In futures markets, the odds of a July move slipped after the release, while the December contract settled closer to a single quarter-point cut.
That caution is now feeding through the long end of the curve, where each inflation print carries more weight than the last.
Economists said the message was less hawkish than restrictive: policy makers are willing to wait, but not yet willing to declare the inflation fight finished.
"The committee's median view now points to one cut at most this year — a step down from where the dot plot stood in March."