Fed Likely Won’t Cut Interest Rates This Year, Minutes Show

The split inside the FOMC

The minutes lay bare a committee working through competing scenarios rather than converging on one.

• "Many" participants indicated the appropriate federal funds rate would be "within or slightly below" the current target range by year-end.
• "Many other" participants assessed the appropriate level would sit above the current range.
• Nine of 18 FOMC members indicated support for at least one rate hike this year.
• A "few" officials argued for hiking but backed the June hold; others viewed policy as too restrictive but also supported holding.
• June marked Kevin Warsh's first meeting as Fed chair. The last cut came in December, under Jerome Powell.

Jeffrey Roach, chief economist at LPL Financial, framed the ambiguity directly: the committee is "working through a wide range of scenarios and will not commit to a specific scenario until the incoming data provides necessary clarity." He does not expect a policy change at the next meeting.

Inflation and the oil shock

The macro backdrop explains the hawkish drift. Core PCE — the Fed's preferred inflation gauge — rose 4.1% year-over-year in May, up from 3.8% in April, according to the Bureau of Economic Analysis. Core CPI hit a three-year high at 4.2% annually. Gas prices surged 59% year-over-year.

A renewed flare-up in the Middle East added a second pressure point. President Trump said Wednesday that the interim peace deal with Iran was "over" and the U.S. would "probably" strike the country again overnight. Brent crude pushed back above $80; oil futures climbed more than 6%. Equities stumbled on the headlines: the Dow dropped roughly 570 points (–1%), the S&P 500 fell 0.3%, and the Nasdaq slipped 0.1%.

What changes in the portfolio

For investors rebalancing around the rate path, the shift reshapes the relative ranking of asset classes.

• Cash and short-duration Treasuries retain a yield edge that compounds in high-yield savings and brokerage sweep accounts.
• Shorter-duration and floating-rate bond positions outperform long-duration paper if the hike scenario materializes.
• Rate-sensitive equities — REITs, utilities, and high-multiple growth — face compressed valuations under higher discount rates.
• Gold prices are falling as hike odds rise, per USA Today. The mechanism is mechanical: higher real rates lift the opportunity cost of holding non-yielding assets.
• For those tracking the implied probability curve, how those Fed Funds futures probabilities are calculated offers a useful primer on the inputs behind CME's FedWatch.

Risk to monitor: a sustained oil spike, a core PCE print above the May level, or further escalation in the Strait of Hormuz would push September hike odds through 70% and reset the terminal rate above 3.75%. Watch the next CPI release and the July FOMC statement for confirmation of the hold-and-hawkish lean.