FOMC & Monetary Policy

Minutes of the Federal Open Market Committee March 17–18, 2026 A joint meeting of the Federal Open Market Committee and the Board of Governors of the Federal Reserve System was held in the offices of the Board of Governors on Tuesday, March 17, 2026, at 10:30 a.m. and continued on Wednesday, March 18, 2026, at 9:00 a.m. 1 Developments in Financial Markets and Open Market Operations The manager turned first to an overview of broad market developments during the intermeeting period. Earlier in the period, concerns about artificial intelligence (AI) disruptions to certain business models led to declines in policy rate expectations and interest rates and weighed on equity prices. The conflict in the Middle East—which started later in the period—resulted in sharp increases in energy prices, raised questions about the macroeconomic outlook, and caused a notable repricing in several asset classes. Respondents to the Open Market Desk Survey of Market Expectations (Desk survey) viewed the U.S. macroeconomic outlook as little changed, apart from an increase in near-term inflation projections; the manager noted, however, that survey responses came in the early days of the conflict. The manager observed that front-month futures prices for crude oil increased about 50 percent over the period. The significantly smaller rise of the longer-dated futures prices compared with the front-end futures, however, could have indicated expectations that most of the recent increase in oil prices will be relatively short lived. Other market prices were consistent with this interpretation. For example, the one-year inflation swap rate rose nearly 50 basis points over the period, but forward measures of inflation compensation at horizons beyond one year were little changed. The manager then turned to policy rate expectations. The near-term federal funds rate path implied by futures prices shifted higher, on net, over the period, with a rate cut not fully priced in until December. The modal path based on options prices also shifted higher and was consistent with no rate change this year, compared with one 25 basis point cut previously. The distribution of federal funds rate outcomes early next year implied by options prices shifted notably to higher values and became more dispersed; as a result, the probability of rate hikes through that period increased to about 30 percent. By contrast, the median of the modal paths reported in the Desk survey continued to show two 25 basis point rate cuts this year, although survey respondents pushed out the timing of those cuts slightly compared with their previous expectations. The manager noted, however, that market intelligence suggested that some survey respondents appeared to have shifted their expectations in the direction of fewer rate cuts in the days after the survey was conducted. Treasury yields ended the intermeeting period higher, on net, more so at the short end. Changes in term premiums appeared to account for a substantial fraction of the changes in yields, likely reflecting factors such as the greater general uncertainty induced by the conflict in the Middle East and shifts in investor positioning. Treasury market liquidity diminished a bit over the period, in line with the increase in yield volatility, but the Treasury market continued to function well. Broad equity prices fell about 5 percent over the period. The software sector underperformed the broader market again over the intermeeting period, as AI-related concerns weighed especially heavily on the sector. The same concerns were also evident in segments of the credit market. Leveraged loan prices for software firms declined sharply over the period, whereas prices in other sectors were more stable. There were also notable increases in redemption requests at several private credit funds that offer investors limited liquidity through quarterly redemption opportunities. The manager noted that the staff will continue to monitor the situation closely. The manager then discussed international developments. Foreign equities outperformed U.S. equities in 2025 and in early 2026, but their prices had declined more than those of U.S. equities since the start of the conflict in the Middle East. The exchange value of the dollar had experienced sharp swings over the previous several weeks but was roughly unchanged, on net, year to date. Sentiment toward the dollar appeared to have become more positive in the last several days of the intermeeting period, buoyed by the dollar's traditional safe-haven status and the U.S.'s position as a net energy exporter. With elevated energy prices causing global inflationary pressures, several central banks previously expected by market participants to either remain on hold or ease policy further—including the European Central Bank, the Bank of Canada, and the Swiss National Bank—were now expected to hike rates modestly this year. The manager observed that money market conditions had remained broadly stable amid ongoing reserve management purchases (RMPs). Over the intermeeting period, the effective federal funds rate remained unchanged at 1 basis point below the interest on reserve balances (IORB) rate, and rates on repurchase agreements (repo) remained generally near the IORB rate. Overnight reverse repo operations saw minimal usage except at month-ends, and standing repo operations were used on only a couple of days, which were days with relatively high volumes of Treasury securities settlements. On one of those days, standing repo usage reached $30 billion, the third-largest volume since the inception of the standing operations. The manager saw this development, together with interdealer repo rates being not much above the standing repo rate that day, as suggesting a greater willingness of at least some counterparties to use the operations when economically sensible following the changes to standing repo operations implemented in December. The manager assessed that money market conditions as well as various indicators of reserve conditions were consistent with reserves remaining within the ample range. Finally, the manager discussed the expected trajectory of key components of the Federal Reserve's balance sheet. System Open Market Account (SOMA) holdings were expected to continue to grow with RMPs. In April, tax payments were expected to cause wide swings in the Treasury General Account and reserves. Reserves were expected to hit their trough in late April, at which point they would be about equal to the level that had prevailed at the end of last year. After April, reserves were projected to average about $3 trillion through September. The manager noted that, after April, the monthly pace of RMPs was likely to be reduced significantly as swings in nonreserve liabilities were expected to moderate; the adjustment was likely to be somewhat gradual. By unanimous vote, the Committee ratified the Desk's domestic transactions over the intermeeting period. There were no intervention operations in foreign currencies for the System's account during the intermeeting period. Staff Review of the Economic Situation The information available at the time of the meeting indicated that real gross domestic product (GDP) continued to expand at a solid pace, particularly after accounting for the effects of the federal government shutdown in the fourth quarter of last year. The unemployment rate was little changed in recent months, though job gains continued to be low. Consumer price inflation remained elevated. Total consumer price inflation—as measured by the 12-month change in the personal consumption expenditures (PCE) price index—was 2.8 percent in January. Core PCE price inflation, which excludes changes in consumer energy prices and many consumer food prices, was 3.1 percent in January. Both total and core inflation measures were about 1/4 percentage point higher than their levels a year earlier. Core goods price inflation had picked up over that period, a development that the staff largely attributed to the effects of higher tariffs. Core services price inflation had declined relative to a year earlier, led by a slowing in housing services price inflation, while core nonhousing services price inflation was little changed. Based on data from the consumer price index and the producer price index, the staff estimated that total PCE price inflation was 2.8 percent in February, while core PCE price inflation was 3.0 percent. The unemployment rate was 4.4 percent in February, the same as its level in September of 2025. The average monthly change in total payroll employment was low over January and February. The effects of a strike in the health-care sector and unusually harsh winter weather weighed on payrolls in February, but those effects were expected to unwind in March. The employment cost index increased 3.4 percent over the 12 months ending in December, and average hourly earnings rose 3.8 percent over the 12 months ending in February; both measures were slightly below their year-earlier levels. Real GDP growth was solid last year, although it was held down in the fourth quarter by the effects of the federal government shutdown. Available indicators suggested that real GDP growth had picked up in the first quarter of this year, partially boosted by the unwinding of the effects of the government shutdown. Real private domestic final purchases (PDFP)—which comprises PCE and private fixed investment and which often provides a better signal of underlying economic momentum than does GDP—rose at a faster pace than real GDP last year. Available indicators suggested that real PDFP growth in the first quarter had stepped up from its pace last year. Incoming data indicated that real goods exports rose sharply at the start of the year after having fallen in the fourth quarter. After surging in November and December, real goods imports remained about flat in January, as continued strong imports of high-tech goods were offset by declines in imports of consumer goods. Economic activity abroad continued to expand at a moderate pace in the fourth quarter, largely supported by strong high-tech exports from Mexico and several Asian economies. By contrast, real GDP grew only modestly in the euro area and in the U.K., and it contracted in Canada. Recent data pointed to foreign GDP having continued to expand at a moderate pace so far this year. Foreign headline inflation generally remained near central banks' targets, despite still-elevated services price inflation in some economies. Some measures of near-term inflation expectations increased, as energy and other commodity prices surged with the Middle East conflict. Over the intermeeting period, most foreign central banks kept their policies on hold, although the Reserve Bank of Australia raised its policy rate 25 basis points in March, citing inflationary pressures stemming from tight resource utilization. Staff Review of the Financial Situation Over the intermeeting period, the market-implied expected path of the federal funds rate moved higher, largely reflecting a shift in the anticipated timing of easing toward the end of this year. The two-year nominal Treasury yield increased, on net, primarily driven by higher inflation compensation, consistent with rising near-term inflation concerns tied to surging energy prices following developments in the Middle East. By contrast, the 10-year nominal Treasury yield was little changed on net. Broad equity price indexes declined and the one-month option-implied volatility on the S&P 500 index increased notably, as concerns about Middle East developments appeared to weaken investor confidence. Stocks of firms in sectors exposed to potential disruptions caused by AI, such as software, declined more notably. In advanced foreign economies, the surge in energy prices led to notable increases in measures of short-term inflation compensation and sovereign bond yields. The broad dollar index increased moderately, as both a deterioration in market risk sentiment and the status of the U.S. as a net energy exporter supported the dollar. Foreign equity prices decreased modestly, on net, but were volatile. Sovereign credit spreads widened in many emerging market economies, especially in those economies most reliant on energy imports. Conditions in U.S. short-term funding markets remained orderly over the intermeeting period. The effective federal funds rate was unchanged, and average spreads in both secured and unsecured funding markets were generally stable. Ongoing RMPs appeared to help support stable money market conditions and to damp upward pressure on repo rates. In domestic credit markets, financing conditions remained somewhat restrictive for households and small businesses while remaining neutral for medium-sized businesses and municipalities. Conditions remained somewhat restrictive for commercial real estate (CRE) because of a combination of high financing costs and relatively tight underwriting requirements. Although borrowing costs continued to be elevated relative to their average levels since the Global Financial Crisis (GFC), credit flows to medium-sized and large businesses were strong, and corporate debt spreads remained narrow by historical standards. However, firms judged to have significant exposure to AI disruption saw sharp increases in their borrowing costs. Credit continued to be generally available to most businesses, households, and municipalities. By contrast, credit to households with lower credit scores and to small businesses remained somewhat tight. In the residential mortgage market, the volume of mortgage refinancing increased, but home-purchase borrowing remained subdued. Credit remained readily available for qualified borrowers who met standard conforming loan criteria. The credit performance of corporate bonds remained solid for both investment- and speculative-grade firms and was supported by robust profits at large corporations. The 12-month trailing default rate declined to around the 25th percentile of its post-GFC range. Market-implied measures of year-ahead expected defaults were little changed and were near the median of their historical distributions. Likewise, the credit performance of leveraged loans was little changed. Overall delinquency rates for small businesses, CRE, mortgages insured by the Federal Housing Administration, and consumer loans remained elevated. In addition, investor concerns about private credit appeared to be increasing because of the sector's high exposure to software-related business loans that were vulnerable to AI disruption. Staff Economic Outlook The staff projection of economic activity was not as strong as the one prepared for the January meeting, primarily reflecting incoming data and less expected support from financial conditions. The staff had built in only a small effect on economic activity of the lower equity prices and higher crude oil prices associated with reactions to developments in the Middle East. All told, real GDP growth was expected to run about in line with potential growth through 2028. As a result, the unemployment rate was expected to remain near its current level through most of next year and then to edge down to the staff's estimate of the longer-run natural rate of unemployment. The staff's inflation forecast for this year was slightly higher, on balance, than the one prepared for the January meeting, primarily reflecting incoming data and an expected boost to consumer energy prices given the recent run-up in crude oil prices. With the effects of higher crude oil prices and tariffs on inflation expected to wane later this year, inflation was projected to return to its previous disinflationary trend and to be close to 2 percent by the end of next year. The staff continued to view the uncertainty around the forecast as elevated considering the potential economic effects of developments in the Middle East, government policy changes, and the adoption of AI. Risks to the forecasts of employment and real GDP growth were seen as tilted to the downside. Risks to the inflation projection were viewed as a little more skewed to the upside than at the time of the January meeting. With inflation having remained above 2 percent since early 2021, along with the potential effects of Middle East developments, a salient risk was that inflation could prove to be more persistent than the staff anticipated. Participants' Views on Current Conditions and the Economic Outlook In conjunction with this FOMC meeting, participants submitted their projections of the most likely outcomes for real GDP growth, the unemployment rate, and inflation for each year from 2026 through 2028 and over the longer run. The projections were based on participants' individual assessments of appropriate monetary policy, including their projections of the federal funds rate. Participants also provided their individual assessments of the level of uncertainty and the balance of risks associated with their projections. The Summary of Economic Projections was released to the public following the conclusion of the meeting. Participants generally observed that overall inflation remained above the Committee's 2 percent longer-run goal. Some participants remarked that further progress in reducing inflation had been absent in recent months. Some participants noted that the rate of increase in core goods prices remained well above the pace likely to be consistent with the sustainable achievement of the Committee's inflation objective, at least in part reflecting the effects of tariffs. In addition, some participants commented that, although price increases in the housing services category had slowed considerably over the past year and were now close to their pre-pandemic pace, increases in nonhousing core services prices had continued to be elevated relative to their pre-pandemic pace. Several participants noted that most measures of longer-term inflation expectations remained consistent with the Committee's 2 percent objective. Several participants observed, however, that measures of near-term inflation expectations had risen in recent weeks, reflecting the substantial rise in oil prices caused by events in the Middle East. Participants anticipated that, under appropriate monetary policy, inflation would gradually move down toward the Committee's 2 percent objective after the effect of increased tariffs and higher oil prices had faded. Participants generally expected that the effects of tariffs on core goods prices would diminish this year, though they assessed that the pace and timing at which these effects would fade had become more uncertain since the time of the January meeting. Participants also expected that higher oil prices would increase inflation in the near term and delay the anticipated decline in inflation toward the Committee's 2 percent objective. Several participants remarked that the ongoing deceleration in housing services prices was likely to continue to exert downward pressure on overall inflation. Several participants also expected higher productivity growth, associated with technological or deregulatory developments, to put downward pressure on inflation. Participants noted that a prolonged conflict in the Middle East would likely lead to more persistent increases in energy prices and that these higher input costs would be more likely to pass through to core inflation. Some participants highlighted the possibility that, after several years of above-target inflation, longer-term inflation expectations could become more sensitive to energy price increases. Partly as a result of these factors, the vast majority of participants noted that progress toward the Committee's 2 percent objective could be slower than previously expected and judged that the risk of inflation running persistently above the Committee's objective had increased. With regard to the labor market, participants observed that the unemployment rate had been little changed in recent months, while job gains had remained low. Most participants judged that the recent data readings, such as those for job openings, layoffs, hiring, and nominal wage growth, continued to suggest that the labor market was broadly in balance, with the low rate of job growth roughly in line with slower labor force growth. Some of these participants commented that the February payroll employment data were held down by a strike in the health-care sector and by the effects of unusually harsh winter weather. Several other participants, however, highlighted signs of potential softening in the labor market, including a slight increase in the unemployment rate among prime-age workers, the concentration of job growth in the health-care sector—excluding the effects of the February strike—and in a few other sectors, and survey measures of job availability that had declined in recent months. Some participants noted that business survey responses or their business contacts continued to express caution in hiring decisions amid uncertainty about the near-term economic outlook and concern about the longer-term effects of AI and other technologies on the labor market. With respect to the outlook for the labor market, the majority of participants expected the unemployment rate to remain little changed and for net job creation and labor force growth to remain low, while a couple of participants expected labor market conditions to soften. The vast majority of participants judged that risks to the employment side of the mandate were skewed to the downside. In particular, many participants cautioned that, in the current situation of low rates of net job creation, labor market conditions appeared vulnerable to adverse shocks. They pointed to the possibility that a further fall in labor demand could push the unemployment rate sharply higher in a low-hiring environment or that the concentration of job gains in a few less cyclically sensitive sectors was potentially signaling heightened vulnerability in the overall labor market. Many participants cited evidence from business contacts and surveys suggesting that firms were likely to delay or reduce hiring in anticipation of AI adoption, although a few noted that instances of AI-related layoffs remained rare or that firms generally reported using AI to augment, rather than replace, workers. Most participants highlighted the risk that a protracted conflict in the Middle East could weigh on business sentiment and further reduce hiring. Participants observed that economic activity appeared to be expanding at a solid pace. Participants generally noted that consumer spending had been resilient, importantly supported by gains in household wealth. Participants observed that business fixed investment remained robust, largely reflecting strength in the technology sector. With respect to the agricultural sector, a couple of participants remarked that farmers were experiencing strains due to higher fuel and fertilizer prices associated with the conflict in the Middle East. Participants generally anticipated that the pace of real GDP growth would remain solid in 2026. Most participants expected growth to be supported by AI-related investment, continued favorable financial conditions, fiscal policy, or changes in regulatory policy. Most participants cautioned that the recent developments in the Middle East had raised the uncertainty surrounding their outlook for economic activity and had increased the associated downside risks. In their consideration of monetary policy at this meeting, participants noted that inflation remained above the Committee's 2 percent objective and that available indicators suggested that economic activity had been expanding at a solid pace. They observed that job gains had remained low and that the unemployment rate had been little changed in recent months. Participants agreed that uncertainty about the economic outlook remained elevated and that the conflict in the Middle East was an additional source of uncertainty. Against this backdrop, almost all participants supported maintaining the current target range for the federal funds rate at this meeting. With the policy rate having been lowered 75 basis points in the second half of last year, these participants generally viewed the policy rate as within a range of plausible estimates of its neutral level. They judged that leaving the policy rate unchanged kept the Committee well positioned to determine the extent and timing of additional adjustments to the policy rate based on the incoming data, the evolving outlook, and the balance of risks. Most participants commented that it was too early to know how developments in the Middle East would affect the U.S. economy and judged it prudent to continue to monitor the situation and assess the implications for the appropriate stance of monetary policy. One participant preferred to lower the target range for the federal funds rate 25 basis points, expressing the concern that the current stance of policy remained restrictive and was contributing to weak labor demand and elevated downside risks to the labor market. With regard to the outlook for monetary policy, in light of the heightened degree of economic uncertainty, participants emphasized the importance of being nimble in adjusting the stance of policy in response to incoming data, the evolving outlook, and the balance of risks. Many participants judged that, in time, it would likely become appropriate to lower the target range for the federal funds rate if inflation were to decline in line with their expectations. A couple of these participants highlighted that, in their projection for the appropriate path of the policy rate, they had pushed their assessment of the most likely timing of rate cuts further into the future in light of recent readings on inflation. Some participants judged that there was a strong case for a two-sided description of the Committee's future interest rate decisions in the postmeeting statement, reflecting the possibility that upward adjustments to the target range for the federal funds rate could be appropriate if inflation were to remain at above-target levels. All participants agreed that monetary policy was not on a preset course and would be determined on a meeting-by-meeting basis. In discussing risk-management considerations that could bear on the outlook for monetary policy, the vast majority of participants judged that upside risks to inflation and downside risks to employment were elevated, and the majority of participants noted that these risks had increased with developments in the Middle East. In particular, most participants raised the concern that a protracted conflict in the Middle East could lead to a further softening in labor market conditions, which could warrant additional rate cuts, as substantially higher oil prices could reduce households' purchasing power, tighten financial conditions, and reduce growth abroad. Many participants pointed to the risk of inflation remaining elevated for longer than expected amid a persistent increase in oil prices, which could call for rate increases to help bring inflation down to the Committee's 2 percent objective and keep longer-term inflation expectations firmly anchored. Most participants reiterated, however, that it was too early to know how developments in the Middle East would affect the U.S. economy and judged it prudent to continue to monitor the situation and assess the implications for the appropriate stance of monetary policy. With upside risks to inflation and downside risks to employment both elevated, some participants remarked that it was important that the Committee follow its balanced approach in promoting the Federal Reserve's employment and inflation goals, taking into account the extent of departures from those goals and the potentially different time horizons over which employment and inflation were projected to return to levels judged consistent with the Committee's mandate. Several participants discussed issues related to the Federal Reserve's balance sheet and monetary policy implementation, including the relationship between bank liquidity regulations and the demand for reserves. A couple of these participants also commented on the role of standing repo operations in the implementation of monetary policy and supported further study of centrally clearing these operations in light of the evolving structure of money markets. Committee Policy Actions In their discussions of monetary policy for this meeting, members agreed that available indicators suggested that economic activity had been expanding at a solid pace. They noted that job gains had remained low and the unemployment rate had been little changed in recent months. Members agreed that inflation remained somewhat elevated. Members acknowledged that uncertainty about the economic outlook remained elevated. They noted that the implications of developments in the Middle East for the U.S. economy were uncertain. Members concurred that the Committee was attentive to the risks to both sides of its dual mandate. In support of the Committee's goals, almost all members agreed to maintain the target range for the federal funds rate at 3-1/2 to 3-3/4 percent. One member voted against that decision and preferred to lower the target range 1/4 percentage point. Members agreed that in considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee would carefully assess incoming data, the evolving outlook, and the balance of risks. Members agreed that the postmeeting statement should affirm their strong commitment both to supporting maximum employment and to returning inflation to the Committee's 2 percent objective. Members agreed that in assessing the appropriate stance of monetary policy, the Committee would continue to monitor the implications of incoming information for the economic outlook. They would be prepared to adjust the stance of monetary policy as appropriate if risks emerged that could impede the attainment of the Committee's goals. Members also agreed that their assessments would take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments. At the conclusion of the discussion, the Committee voted to direct the Federal Reserve Bank of New York, until instructed otherwise, to execute transactions in the SOMA in accordance with the following domestic policy directive, for release at 2:00 p.m.: "Effective March 19, 2026, the Federal Open Market Committee directs the Desk to: Undertake open market operations as necessary to maintain the federal funds rate in a target range of 3-1/2 to 3-3/4 percent. Conduct standing overnight repurchase agreement operations at a rate of 3.75 percent. Conduct standing overnight reverse repurchase agreement operations at an offering rate of 3.5 percent and with a per-counterparty limit of $160 billion per day. Increase the System Open Market Account holdings of securities through purchases of Treasury bills and, if needed, other Treasury securities with remaining maturities of 3 years or less to maintain an ample level of reserves. Roll over at auction all principal payments from the Federal Reserve's holdings of Treasury securities. Reinvest all principal payments from the Federal Reserve's holdings of agency securities into Treasury bills." The vote also encompassed approval of the statement below for release at 2:00 p.m.: "Available indicators suggest that economic activity has been expanding at a solid pace. Job gains have remained low, and the unemployment rate has been little changed in recent months. Inflation remains somewhat elevated. The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty about the economic outlook remains elevated. The implications of developments in the Middle East for the U.S. economy are uncertain. The Committee is attentive to the risks to both sides of its dual mandate. In support of its goals, the Committee decided to maintain the target range for the federal funds rate at 3-1/2 to 3-3/4 percent. In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective. In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals. The Committee's assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments." Voting for this action: Jerome H. Powell, John C. Williams, Michael S. Barr, Michelle W. Bowman, Lisa D. Cook, Beth M. Hammack, Philip N. Jefferson, Neel Kashkari, Lorie K. Logan, Anna Paulson, and Christopher J. Waller. Voting against this action: Stephen I. Miran. Stephen I. Miran preferred to lower the target range for the federal funds rate by 1/4 percentage point at this meeting. Consistent with the Committee's decision to leave the target range for the federal funds rate unchanged, the Board of Governors of the Federal Reserve System voted unanimously to maintain the interest rate paid on reserve balances at 3.65 percent, effective March 19, 2026. The Board of Governors of the Federal Reserve System voted unanimously to approve the establishment of the primary credit rate at the existing level of 3.75 percent. It was agreed that the next meeting of the Committee would be held on Tuesday–Wednesday, April 28–29, 2026. The meeting adjourned at 10:15 a.m. on March 18, 2026. Notation Vote By notation vote completed on February 17, 2026, the Committee unanimously approved the minutes of the Committee meeting held on January 27–28, 2026. By notation vote completed on March 2, 2026, the Committee unanimously approved updates to the Program for Security of FOMC Information to reduce operational complexities. Committee organizational documents are reviewed at least annually, including at the January meeting of each year, and adjusted as appropriate. Attendance Jerome H. Powell, Chair John C. Williams, Vice Chair Michael S. Barr Michelle W. Bowman Lisa D. Cook Beth M. Hammack Philip N. Jefferson Neel Kashkari Lorie K. Logan Stephen I. Miran Anna Paulson Christopher J. Waller Thomas I. Barkin, Mary C. Daly, Austan D. Goolsbee, Sushmita Shukla, and Cheryl L. Venable, Alternate Members of the Committee Susan M. Collins, Alberto G. Musalem, and Jeffrey R. Schmid, Presidents of the Federal Reserve Banks of Boston, St. Louis, and Kansas City, respectively Joshua Gallin, Secretary Matthew M. Luecke, Deputy Secretary Michelle A. Smith, Assistant Secretary Mark E. Van Der Weide, General Counsel Richard Ostrander, Deputy General Counsel Trevor A. Reeve, Economist Stacey Tevlin, Economist Beth Anne Wilson, Economist Stephanie R. Aaronson, Shaghil Ahmed, Michael T. Kiley, Elizabeth Klee, and Andrea Raffo, Associate Economists Roberto Perli, Manager, System Open Market Account Julie Ann Remache, Deputy Manager, System Open Market Account Daniel Aaronson, Interim Director of Research, Federal Reserve Bank of Chicago Jose Acosta, Senior System Engineer II, Division of Information Technology, Board Alyssa Arute, 2 Assistant Director, Division of Reserve Bank Operations and Payment Systems, Board Ayelen Banegas, Principal Economist, Division of Monetary Affairs, Board Alessandro Barbarino, Special Adviser to the Board, Division of Board Members, Board William F. Bassett, Senior Associate Director, Division of Financial Stability, Board Michele Cavallo, Special Adviser to the Board, Division of Board Members, Board Daniel Cooper, Vice President, Federal Reserve Bank of Boston Francisco Covas, Deputy Director, Division of Supervision and Regulation, Board Stephanie E. Curcuru, Deputy Director, Division of International Finance, Board Ryan A. Decker, Special Adviser to the Chair, Division of Board Members, Board Laura J. Feiveson, Special Adviser to the Board, Division of Board Members, Board Andrew Figura, Senior Associate Director, Division of Research and Statistics, Board Andrew T. Foerster, Senior Research Advisor, Federal Reserve Bank of San Francisco Glenn Follette, Associate Director, Division of Research and Statistics, Board Shigeru Fujita, Senior Economic Advisor and Economist I, Federal Reserve Bank of Philadelphia Jenn Gallagher, 3 Assistant to the Board, Division of Board Members, Board Jonathan Glicoes, Senior Financial Institution Policy Analyst II, Division of Monetary Affairs, Board Luca Guerrieri, Senior Associate Director, Division of International Finance, Board Christopher J. Gust, Senior Associate Director, Division of Monetary Affairs, Board Valerie S. Hinojosa, Section Chief, Division of Monetary Affairs, Board Jane E. Ihrig, Special Adviser to the Board, Division of Board Members, Board Benjamin K. Johannsen, Deputy Associate Director, Division of Monetary Affairs, Board Don H. Kim, 2 Senior Adviser, Division of Monetary Affairs, Board Kevin L. Kliesen, Assistant Vice President, Federal Reserve Bank of St. Louis Scott R. Konzem, Senior Economic Modeler II, Division of Monetary Affairs, Board Christopher J. Kurz, Assistant Director, Division of Research and Statistics, Board Andreas Lehnert, Director, Division of Financial Stability, Board Logan T. Lewis, Assistant Director, Division of International Finance, Board Byron Lutz, Deputy Associate Director, Division of Research and Statistics, Board Rebecca McCaughrin, 2 Policy and Market Analysis Director, Federal Reserve Bank of New York Benjamin W. McDonough, Secretary, Office of the Secretary, Board Davide Melcangi, Economic Research Advisor, Federal Reserve Bank of New York Norman J. Morin, Special Adviser to the Board, Division of Board Members, Board David Na, Acting Group Manager, Division of Monetary Affairs, Board Edward Nelson, Senior Adviser, Division of Monetary Affairs, Board David Newville, Director, Division of Consumer and Community Affairs, Board Anna Nordstrom, Head of Markets, Federal Reserve Bank of New York Marcelo Ochoa, Principal Economist, Division of Monetary Affairs, Board Alyssa T. O'Connor, Special Adviser to the Board, Division of Board Members, Board John A. O'Trakoun, Senior Policy Economist, Federal Reserve Bank of Richmond Ekaterina Peneva, Assistant Director, Division of Research and Statistics, Board Damjan Pfajfar, Vice President, Federal Reserve Bank of Cleveland Eugenio P. Pinto, Special Adviser to the Board, Division of Board Members, Board Zeynep Senyuz, Special Adviser to the Board, Division of Board Members, Board A. Lee Smith, Senior Vice President, Federal Reserve Bank of Kansas City Francisco Vazquez-Grande, Group Manager, Division of Monetary Affairs, Board Jeffrey D. Walker, 2 Senior Associate Director, Division of Reserve Bank Operations and Payment Systems, Board William Wascher, Deputy Director, Division of Research and Statistics, Board Min Wei, Senior Associate Director, Division of Monetary Affairs, Board Benedict Wensley, 2 Policy and Market Analysis Advisor, Federal Reserve Bank of New York Lauren E. Wiese, Information Services Senior Analyst, Division of Monetary Affairs, Board, and Federal Reserve Bank of Chicago Jonathan Willis, Vice President, Federal Reserve Bank of Atlanta Rebecca Zarutskie, Senior Vice President, Federal Reserve Bank of Dallas _______________________ Joshua Gallin Secretary 1. The Federal Open Market Committee is referenced as the "FOMC" and the "Committee" in these minutes; the Board of Governors of the Federal Reserve System is referenced as the "Board" in these minutes. Return to text 2. Attended through the discussion of developments in financial markets and open market operations. Return to text 3. Attended from the discussion of the economic and financial situation through the end of the meeting. Return to text

Minutes of the Federal Open Market Committee January 27–28, 2026 A joint meeting of the Federal Open Market Committee and the Board of Governors of the Federal Reserve System was held in the offices of the Board of Governors on Tuesday, January 27, 2026, at 10:00 a.m. and continued on Wednesday, January 28, 2026, at 9:00 a.m. 1 Annual Organizational Matters 2 The agenda for this meeting reported that advices of the election of the following members and alternate members of the Federal Open Market Committee for a term beginning January 27, 2026, were received and that these individuals executed their oaths of office. The elected members and alternate members were as follows: John C. Williams, President of the Federal Reserve Bank of New York, with Sushmita Shukla, First Vice President of the Federal Reserve Bank of New York, as alternate; Anna Paulson, President of the Federal Reserve Bank of Philadelphia, with Thomas I. Barkin, President of the Federal Reserve Bank of Richmond, as alternate; Beth M. Hammack, President of the Federal Reserve Bank of Cleveland, with Austan D. Goolsbee, President of the Federal Reserve Bank of Chicago, as alternate; Lorie K. Logan, President of the Federal Reserve Bank of Dallas, with Raphael W. Bostic, President of the Federal Reserve Bank of Atlanta, as alternate; Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, with Mary C. Daly, President of the Federal Reserve Bank of San Francisco, as alternate. By unanimous vote, the following officers of the Committee were selected to serve until the selection of their successors at the first regularly scheduled meeting of the Committee in 2027: Jerome H. Powell Chair John C. Williams Vice Chair Joshua Gallin Secretary Matthew M. Luecke Deputy Secretary Brian J. Bonis Assistant Secretary Michelle A. Smith Assistant Secretary Mark E. Van Der Weide General Counsel Richard Ostrander Deputy General Counsel Reena Sahni Assistant General Counsel Trevor A. Reeve Economist Stacey Tevlin Economist Beth Anne Wilson Economist Stephanie R. Aaronson Shaghil Ahmed Kartik B. Athreya Brian M. Doyle Eric M. Engen Michael T. Kiley Elizabeth Klee Edward S. Knotek II Karel Mertens Donald Keith Sill Andrea Raffo Associate Economists By unanimous vote, the Committee selected the Federal Reserve Bank of New York to execute transactions for the System Open Market Account (SOMA). By unanimous vote, the Committee selected Roberto Perli and Julie Ann Remache to serve at the pleasure of the Committee as manager and deputy manager of the SOMA, respectively, on the understanding that these selections were subject to being satisfactory to the Federal Reserve Bank of New York. Secretary's note: The Federal Reserve Bank of New York subsequently sent advice that the selections indicated previously were satisfactory. By unanimous vote, the Committee approved the FOMC Authorizations and Continuing Directives for Open Market Operations, with a few minor changes to the Continuing Directive for Domestic Open Market Operations to ensure consistency with the Committee's direction on conducting standing repurchase agreement (repo) operations in the Implementation Note issued following the December 2025 meeting. All participants indicated support for, and agreed to abide by, the FOMC Policy on Investment and Trading for Committee Participants and Federal Reserve System Staff, the Program for Security of FOMC Information, the FOMC Policy on External Communications of Committee Participants, and the FOMC Policy on External Communications of Federal Reserve System Staff. The Committee voted unanimously to reaffirm those four policies. As part of the Committee's annual organizational review process, all participants indicated support for the Statement on Longer-Run Goals and Monetary Policy Strategy, and the Committee voted unanimously to reaffirm it without revision. Developments in Financial Markets and Open Market Operations The manager turned first to an overview of broad market developments during the intermeeting period. Respondents to the Open Market Desk Survey of Market Expectations (Desk survey) continued to see the economy as resilient and again marked up their forecasts for real gross domestic product (GDP) growth in 2026, while their expectations for headline personal consumption expenditures (PCE) inflation and the unemployment rate were little changed. Market- and survey-based policy rate expectations were likewise little changed. Market-based measures of policy rate expectations indicated one to two 25 basis point rate cuts this year, and the median modal path of the federal funds rate, as given in the Desk survey, continued to indicate expectations of two 25 basis point rate cuts this year. The manager turned next to Treasury market developments and market-based measures of inflation compensation. Shorter-term Treasury yields were little changed, while longer-term yields rose a few basis points on net; the Treasury curve steepened slightly as a result. Near-term inflation compensation continued to decline amid lower-than-expected consumer price index (CPI) readings, lower energy prices, and lower-than-anticipated pass-through of tariffs to customers; forward rates suggested that near-term inflation would stabilize close to current levels for the rest of the year. Model-based measures of short-term inflation expectations also declined some over the intermeeting period, with forward rates suggesting further modest declines over the course of this year. The Treasury market continued to function well amid low volatility. In light of the growing portion of Treasury securities that is financed using repos, the manager noted the importance of the stability of the repo market for the continued smooth functioning of the Treasury market. The recent announcement that Fannie Mae and Freddie Mac may increase their mortgage investment portfolios garnered substantial market attention and was followed by a notable decline in mortgage-backed securities yields relative to those on comparable-maturity Treasury yields. Still, the manager observed that the decline was unlikely to result in a material increase in mortgage refinancing because current mortgage rates are well above the weighted average rate of outstanding mortgages. The manager moved to a discussion of equity prices. The largest technology companies continued to underperform the market, as investors remained focused on their elevated valuations and large capital expenditures. Excluding those companies, the S&P 500 was up nearly 3 percent over the intermeeting period; cyclical sectors and indexes of firms with smaller market capitalizations performed even better. Regarding international developments, private-sector consensus forecasts continued to call for dollar depreciation this year, as many of these forecasters expected a larger reduction in policy rates in the U.S. than in other advanced-economy jurisdictions. The extent of expected depreciation had moderated quite a bit, on net, over the previous several months, however, in light of continued improvement in the expected growth of the U.S. economy relative to the expected growth of other major economies. In the days leading up to the meeting, the dollar had depreciated markedly after reports that the Desk had made requests for indicative quotes, known as "rate checks," on the dollar–yen exchange rate. The manager noted that the Desk had requested those quotes solely on behalf of the U.S. Treasury in the Federal Reserve Bank of New York's role as the fiscal agent for the U.S. The manager went on to discuss developments in money markets. Over the intermeeting period, the effective federal funds rate remained stable at a level just below the interest rate on reserve balances, and pressures in repo rates generally moderated. While repo rates increased notably at year-end, rate pressure was less than investors had generally anticipated. Money market contacts attributed the better-than-expected outcome to a variety of factors, including an increase in available liquidity due to the start of reserve management purchases (RMPs) and a lower Treasury General Account (TGA), the recent changes to standing repo operations' design and communications, the increased adoption of centrally cleared repo, and the overall preparedness of investors for year-end tightness. The manager noted that the changes to standing repo operations implemented in December might have made market participants more willing to participate in these operations, as suggested by increased utilization relative to the pre-December period when market rates exceeded the rate on standing repo operations. Market contacts mentioned that the removal of the aggregate limit, the clarifications that these operations are intended for monetary policy implementation purposes, and the statement by the Chair that the operations are expected to be used when "economically sensible" were particularly helpful factors. Finally, the manager discussed the expected trajectory of key components of the Federal Reserve's balance sheet. With RMPs continuing, reserves were expected to increase until early April before dropping quickly and sharply as tax revenues flow into the TGA. At their trough, reserves were expected to be at a level comparable with what prevailed at year-end. Over most of the projection period, reserves were expected to fluctuate in a range close to $3 trillion. By unanimous vote, the Committee ratified the Desk's domestic transactions over the intermeeting period. There were no intervention operations in foreign currencies for the System's account during the intermeeting period. Staff Review of the Economic Situation The information available at the time of the meeting indicated that real GDP continued to expand in 2025, at a rate slightly below its 2024 pace. Labor market conditions showed signs of stabilizing following a period of gradual cooling. Consumer price inflation remained somewhat elevated. The unemployment rate was 4.4 percent in December, unchanged from its level in September. The average monthly change in total payrolls turned negative in the fourth quarter, reflecting a large drop in government employment in October as workers rolled off payrolls after the end of the deferred resignation program; average payroll gains in November and December were similar to the average gains seen over the third quarter. Average hourly earnings rose 3.8 percent over the 12 months ending in December, slightly below their year-earlier pace. Total consumer price inflation—as measured by the 12-month change in the price index for PCE—was 2.8 percent in November, a little higher than its year-earlier pace of 2.6 percent. Core PCE price inflation, which excludes changes in consumer energy prices and many consumer food prices, was 2.8 percent in November, compared with 3.0 percent a year earlier. Core services price inflation had declined relative to a year earlier, led by a deceleration in housing services prices. However, core goods price inflation had picked up over that period, a development that the staff largely attributed to the effects of higher tariffs. In December, the 12-month change in the CPI was 2.7 percent and core CPI inflation was 2.6 percent; both were below their year-earlier rates. Based on the CPI, the staff estimated that total PCE price inflation was 2.9 percent in December and core PCE price inflation was 3.0 percent. The staff also noted that data collection issues related to the government shutdown had likely pushed down the levels of the CPI and the PCE price index in November and December. Real GDP posted a solid gain in the third quarter. Available indicators suggested that real GDP growth had slowed in the fourth quarter, with the government shutdown estimated to have reduced fourth-quarter real GDP growth about 1 percentage point. Real private domestic final purchases (PDFP)—which comprises PCE and private fixed investment and which often provides a better signal of underlying economic momentum than does GDP—rose at the same average pace as real GDP over the first three quarters of 2025; available indicators suggested that real PDFP growth also slowed in the fourth quarter but less markedly than real GDP growth. Nominal goods exports rose further in October, while nominal goods imports declined sharply after falling in the third quarter. Accordingly, the goods trade deficit continued to narrow following a substantial widening at the start of 2025 that resulted from a front-loading of imports ahead of anticipated tariff hikes. Recent indicators suggested that foreign economic activity expanded at a below-trend pace in the second half of last year. U.S. tariffs continued to weigh on foreign manufacturing activity, notably for Canada and Mexico in autos, aluminum, steel, and related industries. By contrast, in some emerging Asian economies, exports of high-tech products surged amid robust demand from the artificial intelligence (AI) boom. In China, activity was boosted by strong exports to markets other than the U.S. Headline inflation continued to run near central bank targets in many foreign economies, although upward pressures on food and services prices remained in some jurisdictions. A few foreign central banks cut their policy rates, including the Bank of England and the Bank of Mexico, but most others left them unchanged. The Bank of Japan was a notable exception, raising its key policy rate toward its assessment of the neutral range. Staff Review of the Financial Situation The market-implied expected path of the federal funds rate, nominal Treasury yields, and swap-based measures of inflation compensation were little changed, on net, over the intermeeting period. Broad equity price indexes rose modestly, on net, while credit spreads remained low by historical standards. The one-month option-implied volatility on the S&P 500 index ended the period roughly unchanged at a moderate level by historical standards. Geopolitical developments led to some volatility in foreign financial markets over the intermeeting period, but risk appetite quickly recovered. On net, foreign equity price indexes rose and outperformed U.S. counterparts, extending last year's trend. Japanese government bond yields increased notably because of increased political uncertainty and investor concerns over fiscal prospects, but spillovers to other advanced-economy yields were modest. The dollar depreciated against most currencies. The Japanese yen appreciated late in the intermeeting period amid speculation among market participants that authorities may intervene in foreign exchange markets to support the yen. Conditions in short-term funding markets were stable. The Federal Reserve's initiation of RMPs as well as Treasury bill paydowns contributed to a reduction in upward pressures on money market rates. The 25 basis point decrease in the target range for the federal funds rate in December quickly passed through to secured and unsecured money market rates. Year-end pressures in short-term funding markets were subdued; conditions were supported by additional liquidity resulting from RMPs and a smaller TGA, increased take-up of standing repo operations, and some dealers locking in financing ahead of year-end. In domestic credit markets, borrowing costs of businesses, households, and municipalities remained significantly lower than the highs observed in 2023 but elevated relative to their average post–Global Financial Crisis levels. Yields on corporate bonds, leveraged loans, and commercial mortgage-backed securities (CMBS) all declined somewhat over the intermeeting period, as did rates on 30-year fixed-rate conforming residential mortgages and new auto loans. Credit remained generally available to most businesses, households, and municipalities. Issuance volumes in corporate bond, private credit, and long-term municipal bond markets were strong, and bank loans continued to expand at a moderate pace. By contrast, credit appeared to remain relatively tight for small businesses and for people with low credit scores. Responses to the January Senior Loan Officer Opinion Survey on Bank Lending Practices (SLOOS) suggested a slight further easing in lending standards, on balance, in the fourth quarter, principally reflecting eased standards for commercial real estate and consumer loans. 3 The overall level of bank lending standards aggregated across all loan categories was estimated to be around the median level observed since 2011. Credit performance was stable but generally weaker than average pre-pandemic performance levels. The 12-month trailing default rates for corporate bonds and leveraged loans decreased in November and December. For direct private lending borrowers, default rates remained low, but payment-in-kind continued to be used to defer interest payments for many loans. Delinquency rates on small business and CMBS loans were little changed in November and remained elevated relative to pre-pandemic levels. For households, delinquency rates for most mortgage types remained near historical lows, while those for credit card and auto loans remained above pre-pandemic levels. The staff provided an updated assessment of the stability of the U.S. financial system and, on balance, continued to characterize the system's financial vulnerabilities as notable. The staff judged that asset valuation pressures were elevated. Price-to-earnings ratios for public equities stood at the upper end of their historical distribution, reflecting, in part, expectations of strong earnings growth for technology firms and elevated risk appetite among investors. Vulnerabilities associated with nonfinancial business and household debt were characterized as moderate. Corporate debt grew modestly over the past few years, with growth concentrated in investment-grade public corporations. The financing of AI investment will likely entail higher debt issuance going forward, but low debt loads at most technology firms and muted aggregate debt growth in recent years suggest firms have the capacity to accommodate such growth. Vulnerabilities associated with leverage in the financial sector were characterized as notable. Available data suggested that leverage remained high at hedge funds and life insurance companies. By contrast, bank regulatory capital ratios were high, although their market-adjusted capital ratios remained depressed and sensitive to long-term interest rates. Vulnerabilities associated with funding risks were characterized as moderate. The amount of total short-run funding instruments and cash-management vehicles as a fraction of GDP remained in the middle of its historical range, uninsured deposits at banks were likewise within historical norms, and funding risks associated with nontraditional short-term liabilities at life insurance companies were low. The total market capitalization of stablecoins, some of which may be vulnerable to runs, grew significantly in the past two years but remained low relative to other funding instruments. Staff Economic Outlook The staff projection for economic activity was stronger than the one prepared for the December meeting, reflecting incoming data, greater expected support from financial conditions, and a small upward revision to the projected path of potential output. Real GDP growth was expected to outpace potential growth through 2028 as the drag from higher tariffs waned and as fiscal policy and financial market conditions continued to support spending. As a result, the unemployment rate was expected to decline gradually starting this year, moving below the staff's estimate of its natural rate by the end of the year and remaining below the natural rate through 2028. The staff's inflation forecast was slightly higher, on balance, than the one prepared for the December meeting, reflecting the expectation that resource utilization would be tighter and the path of core import prices would be higher than previously projected. With the effect of higher tariffs on inflation expected to wane starting around the middle of this year, inflation was projected to return to its previous disinflationary trend. The staff continued to view the uncertainty around the forecast as elevated in light of ongoing uncertainty about geopolitical developments, government policy changes and their effects, and the effect of AI on the economy. In addition, delays in statistical releases and related data-quality issues were providing an additional source of uncertainty. In an environment of high economic uncertainty, risks around the forecasts for employment and real GDP growth continued to be seen as skewed to the downside. Risks to the inflation projection continued to be viewed as skewed to the upside: With inflation having remained above 2 percent since early 2021, a salient risk was that inflation would prove to be more persistent than the staff anticipated. Participants' Views on Current Conditions and the Economic Outlook Participants observed that overall inflation had eased significantly from its highs in 2022 but remained somewhat elevated relative to the Committee's 2 percent longer-run goal. Participants generally noted that these elevated readings largely reflected inflation in core goods, which appeared to have been boosted by the effects of tariff increases. In contrast to prices for core goods, some participants commented that disinflation appeared to be continuing for core services, particularly for housing services. Regarding the outlook for inflation, participants anticipated that inflation would move down toward the Committee's 2 percent objective, though the pace and timing of this decline remained uncertain. Participants generally expected that the effects of tariffs on core goods prices would likely start to diminish this year. Several participants remarked that the ongoing moderation in inflation for housing services was likely to continue to exert downward pressure on overall inflation. Several participants also expected higher productivity growth associated with technological or regulatory developments to put downward pressure on inflation. Consistent with that view, a few participants mentioned reports from business contacts that firms were automating more operations and using other measures to help offset cost increases, which would reduce the need to pass those increases on to consumer prices or to reduce margins. Most participants, however, cautioned that progress toward the Committee's 2 percent objective might be slower and more uneven than generally expected and judged that the risk of inflation running persistently above the Committee's objective was meaningful. Some of these participants cited reports from business contacts who expected to increase prices this year in response to cost pressures, including those related to tariffs. Several participants also raised the possibility that sustained demand pressures could keep inflation elevated relative to the Committee's 2 percent objective. Participants noted that most measures of longer-term inflation expectations remained consistent with the Committee's 2 percent objective. In addition, several participants highlighted the fact that market- and survey-based measures of near-term inflation expectations had declined from their peaks in the spring of last year. With regard to the labor market, participants observed that the unemployment rate had held steady, on net, in recent months, while job gains had remained low. Most participants noted that recent data readings such as those for the unemployment rate, layoffs, and job openings suggested that labor market conditions may be stabilizing after a period of gradual cooling. Almost all participants observed that while the level of layoffs remained low, hiring remained low as well. Consistent with that observation, several participants noted that their business contacts continued to express caution in hiring decisions, reflecting uncertainty about the economic outlook and the effect of AI and other automation technologies on the labor market. Some participants pointed to supply factors, such as lower net immigration, as contributing to the low pace of job gains. While participants generally assessed that, under appropriate monetary policy, the labor market likely would stabilize and then improve this year, they continued to note that the outlook for the labor market remained uncertain. The vast majority of participants judged that labor market conditions had been showing some signs of stabilization and that downside risks to the labor market had diminished. Some participants, however, noted that even though the labor market was showing signs of stabilization, some indicators such as survey measures of job availability and the share of those working part time for economic reasons continued to suggest softening of conditions. In addition, most participants noted that downside risks to the labor market remained. In particular, some participants pointed to the possibility that a further fall in labor demand could push the unemployment rate sharply higher in a low-hiring environment or that the concentration of job gains in a few less cyclically sensitive sectors was potentially signaling heightened vulnerability in the overall labor market. Participants observed that economic activity appeared to be expanding at a solid pace. Participants generally noted that consumer spending had been resilient, importantly supported by gains in household wealth. While aggregate consumption was seen as resilient, several participants cited reports from business contacts or recent analysis indicating a disparity between strong sales to higher-income consumers and soft sales to lower-income consumers. Participants observed that business fixed investment remained robust, particularly in the technology sector. In the agricultural sector, a couple of participants remarked that the crop sector had remained weak, while the livestock sector had stayed strong. Participants generally anticipated that the pace of economic growth would remain solid in 2026, though uncertainty about the outlook for growth remained high. Most participants expected growth to be supported by continued favorable financial conditions, fiscal policy, or changes in regulatory policy. Moreover, in light of the strong pace of AI-related investment as well as the higher productivity growth of recent years, several participants judged that ongoing gains in productivity would be supportive of economic growth. In their discussion of financial stability, several participants commented on high asset valuations and historically low credit spreads. Some participants discussed potential vulnerabilities associated with recent developments in the AI sector, including elevated equity market valuations, high concentration of market values and activities in a small number of firms, and increased debt financing. A few participants commented that the financing of the AI-related infrastructure buildout in opaque private markets warranted monitoring. Several participants highlighted vulnerabilities associated with the private credit sector and its provision of credit to riskier borrowers, including risks related to interconnections with other types of nonbank financial institutions, such as insurance companies, and banks' exposure to this sector. Several participants commented on risks associated with hedge funds, including their growing footprint in Treasury and equity markets, rising leverage, and continued expansion of relative value trades that could make the Treasury market more vulnerable to shocks. A couple of participants commented that although consumer credit quality remained solid in the aggregate, there were signs of weakness in the financial positions of low- and medium-income households. A few participants noted the need to monitor potential spillovers from volatility in global bond markets and foreign exchange. In their consideration of monetary policy at this meeting, participants noted that inflation had remained somewhat elevated and that available indicators suggested that economic activity had been expanding at a solid pace. They observed that job gains had remained low and that the unemployment rate had shown some signs of stabilization. Against this backdrop, almost all participants supported maintaining the current target range for the federal funds rate at this meeting, while a couple of participants preferred to lower the target range. Those who favored maintaining the target range generally viewed that, after the 75 basis point lowering of the target range last year, the current stance of monetary policy was within the range of estimates of the neutral level. They commented that maintaining the current target range of the federal funds rate at this meeting would leave policymakers well positioned to determine the extent and timing of additional adjustments to the policy rate, with these judgments being based on the incoming data, the evolving outlook, and the balance of risks. Those who preferred to lower the target range at this meeting expressed concerns that the current stance of the policy rate was still meaningfully restrictive and viewed downside risks to the labor market as a more prominent policy concern than the risk of persistently elevated inflation. In considering the outlook for monetary policy, several participants commented that further downward adjustments to the target range for the federal funds rate would likely be appropriate if inflation were to decline in line with their expectations. Some participants commented that it would likely be appropriate to hold the policy rate steady for some time as the Committee carefully assesses incoming data, and a number of these participants judged that additional policy easing may not be warranted until there was clear indication that the progress of disinflation was firmly back on track. Several participants indicated that they would have supported a two-sided description of the Committee's future interest rate decisions, reflecting the possibility that upward adjustments to the target range for the federal funds rate could be appropriate if inflation remains at above-target levels. All participants agreed that monetary policy was not on a preset course and would be informed by a wide range of incoming data, the evolving economic outlook, and the balance of risks. In discussing risk-management considerations that could bear on the outlook for monetary policy, the vast majority of participants judged that downside risks to employment had moderated in recent months while the risk of more persistent inflation remained, and some commented that those risks had come into better balance. Several participants cautioned that easing policy further in the context of elevated inflation readings could be misinterpreted as implying diminished policymaker commitment to the 2 percent inflation objective, perhaps making higher inflation more entrenched. By contrast, a few participants highlighted the risk that labor market conditions could deteriorate significantly while expressing confidence that inflation would continue to decline. These participants cautioned that keeping policy overly restrictive could risk further deterioration in the labor market. Participants judged that a careful balancing of risks was required to achieve the Committee's dual-mandate objectives. Committee Policy Actions In their discussions of monetary policy for this meeting, members agreed that available indicators suggested that economic activity had been expanding at a solid pace. Almost all members agreed that recent developments in the labor market indicated that job gains had remained low and that the unemployment rate had showed some signs of stabilization. Similarly, reflecting recent data on inflation, members agreed that inflation remained somewhat elevated, and with the turn of the calendar year, they agreed to remove the reference to inflation relative to readings from earlier last year. Members agreed that the Committee was attentive to the risks to both sides of its dual mandate, but almost all members no longer judged that downside risks to employment had risen in recent months. In support of its goals, almost all members decided to maintain the target range for the federal funds rate at 3-1/2 to 3-3/4 percent. Two members voted against that decision and preferred to lower the target range by 1/4 percentage point. Members agreed that in considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee would carefully assess incoming data, the evolving outlook, and the balance of risks. Members agreed that the postmeeting statement should affirm their strong commitment both to supporting maximum employment and to returning inflation to the Committee's 2 percent objective. Members agreed that in assessing the appropriate stance of monetary policy, the Committee would continue to monitor the implications of incoming information for the economic outlook. They would be prepared to adjust the stance of monetary policy as appropriate if risks emerged that could impede the attainment of the Committee's goals. Members also agreed that their assessments would take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments. At the conclusion of the discussion, the Committee voted to direct the Federal Reserve Bank of New York, until instructed otherwise, to execute transactions in the SOMA in accordance with the following domestic policy directive, for release at 2:00 p.m.: "Effective January 29, 2026, the Federal Open Market Committee directs the Desk to: Undertake open market operations as necessary to maintain the federal funds rate in a target range of 3-1/2 to 3-3/4 percent. Conduct standing overnight repurchase agreement operations at a rate of 3.75 percent. Conduct standing overnight reverse repurchase agreement operations at an offering rate of 3.5 percent and with a per-counterparty limit of $160 billion per day. Increase the System Open Market Account holdings of securities through purchases of Treasury bills and, if needed, other Treasury securities with remaining maturities of 3 years or less to maintain an ample level of reserves. Roll over at auction all principal payments from the Federal Reserve's holdings of Treasury securities. Reinvest all principal payments from the Federal Reserve's holdings of agency securities into Treasury bills." The vote also encompassed approval of the statement below for release at 2:00 p.m.: "Available indicators suggest that economic activity has been expanding at a solid pace. Job gains have remained low, and the unemployment rate has shown some signs of stabilization. Inflation remains somewhat elevated. The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty about the economic outlook remains elevated. The Committee is attentive to the risks to both sides of its dual mandate. In support of its goals, the Committee decided to maintain the target range for the federal funds rate at 3-1/2 to 3-3/4 percent. In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective. In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals. The Committee's assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments." Voting for this action: Jerome H. Powell, John C. Williams, Michael S. Barr, Michelle W. Bowman, Lisa D. Cook, Beth M. Hammack, Philip N. Jefferson, Neel Kashkari, Lorie K. Logan, and Anna Paulson. Voting against this action: Stephen I. Miran and Christopher J. Waller. Stephen I. Miran and Christopher J. Waller preferred to lower the target range for the federal funds rate by 1/4 percentage point at this meeting. Consistent with the Committee's decision to leave the target range for the federal funds rate unchanged, the Board of Governors of the Federal Reserve System voted unanimously to maintain the interest rate paid on reserve balances at 3.65 percent, effective January 29, 2026. The Board of Governors of the Federal Reserve System voted unanimously to approve the establishment of the primary credit rate at the existing level of 3.75 percent. It was agreed that the next meeting of the Committee would be held on Tuesday–Wednesday, March 17–18, 2026. The meeting adjourned at 10:15 a.m. on January 28, 2026. Notation Vote By notation vote completed on December 29, 2025, the Committee unanimously approved the minutes of the Committee meeting held on December 9–10, 2025. Attendance Jerome H. Powell, Chair John C. Williams, Vice Chair Michael S. Barr Michelle W. Bowman Lisa D. Cook Beth M. Hammack Philip N. Jefferson Neel Kashkari Lorie K. Logan Stephen I. Miran Anna Paulson Christopher J. Waller Thomas I. Barkin, Raphael W. Bostic, Mary C. Daly, Austan D. Goolsbee, and Sushmita Shukla, Alternate Members of the Committee Susan M. Collins, Alberto G. Musalem, and Jeffrey R. Schmid, Presidents of the Federal Reserve Banks of Boston, St. Louis, and Kansas City, respectively Joshua Gallin, Secretary Matthew M. Luecke, Deputy Secretary Brian J. Bonis, Assistant Secretary Michelle A. Smith, Assistant Secretary Mark E. Van Der Weide, General Counsel Richard Ostrander, Deputy General Counsel Trevor A. Reeve, Economist Stacey Tevlin, Economist Beth Anne Wilson, Economist Stephanie R. Aaronson, Shaghil Ahmed, Kartik B. Athreya, Michael T. Kiley, Elizabeth Klee, Edward S. Knotek II, Karel Mertens, and Andrea Raffo, Associate Economists Roberto Perli, Manager, System Open Market Account Julie Ann Remache, Deputy Manager, System Open Market Account Jose Acosta, Senior System Engineer II, Division of Information Technology, Board Isaiah C. Ahn, Information Management Analyst, Division of Monetary Affairs, Board Mary L. Aiken, 4 Acting Director, Division of Supervision and Regulation, Board Alyssa Arute, Assistant Director, Division of Reserve Bank Operations and Payment Systems, Board Alessandro Barbarino, Special Adviser to the Board, Division of Board Members, Board Camille Bryan, Senior Project Manager, Division of Monetary Affairs, Board Isabel Cairó, Group Manager, Division of Monetary Affairs, Board Michele Cavallo, Special Adviser to the Board, Division of Board Members, Board Andrew Cohen, 5 Special Adviser to the Board, Division of Board Members, Board Stephanie E. Curcuru, Deputy Director, Division of International Finance, Board Marnie Gillis DeBoer, 6 Senior Associate Director, Division of Monetary Affairs, Board Wendy E. Dunn, Adviser, Division of Research and Statistics, Board Burcu Duygan-Bump, Senior Associate Director, Division of Research and Statistics, Board Laura J. Feiveson, Special Adviser to the Board, Division of Board Members, Board Erin E. Ferris, Principal Economist, Division of Monetary Affairs, Board Glenn Follette, Associate Director, Division of Research and Statistics, Board Greg Frischmann, 7 Senior Special Counsel, Legal Division, Board; Special Adviser to the Board, Division of Board Members, Board Jenn Gallagher, Assistant to the Board, Division of Board Members, Board Carlos Garriga, Senior Vice President, Federal Reserve Bank of St. Louis David P. Glancy, Principal Economist, Division of Monetary Affairs, Board Joseph W. Gruber, Executive Vice President, Federal Reserve Bank of Kansas City Luca Guerrieri, Senior Associate Director, Division of International Finance, Board Christopher J. Gust, Associate Director, Division of Monetary Affairs, Board Valerie S. Hinojosa, Section Chief, Division of Monetary Affairs, Board Jane E. Ihrig, Special Adviser to the Board, Division of Board Members, Board Scott R. Konzem, Senior Economic Modeler II, Division of Monetary Affairs, Board Anna R. Kovner, Executive Vice President, Federal Reserve Bank of Richmond Spencer D. Krane, Senior Vice President, Federal Reserve Bank of Chicago Sylvain Leduc, Executive Vice President and Director of Economic Research, Federal Reserve Bank of San Francisco Andreas Lehnert, Director, Division of Financial Stability, Board Paul Lengermann, Deputy Associate Director, Division of Research and Statistics, Board Natalie Leonard, 6 Associate, Federal Reserve Bank of New York Kurt F. Lewis, Special Adviser to the Chair, Division of Board Members, Board Logan T. Lewis, Assistant Director, Division of International Finance, Board Stephen F. Lin, Principal Economist, Division of Research and Statistics, Board Laura Lipscomb, Special Adviser to the Board, Division of Board Members, Board Benjamin W. McDonough, Deputy Secretary and Ombudsman, Office of the Secretary, Board Radhika Mithal, 6 Associate Director, Federal Reserve Bank of New York Makoto Nakajima, Vice President, Federal Reserve Bank of Philadelphia Anna Nordstrom, Head of Markets, Federal Reserve Bank of New York Giovanni Olivei, Senior Vice President, Federal Reserve Bank of Boston Julio L. Ortiz, Senior Economist, Division of International Finance, Board Karen M. Pence, Deputy Associate Director, Division of Research and Statistics, Board Caterina Petrucco-Littleton, Deputy Associate Director, Division of Consumer and Community Affairs, Board Brian Phillips, 8 Special Counsel, Legal Division, Board; Special Adviser to the Board, Division of Board Members, Board Eugenio P. Pinto, Special Adviser to the Board, Division of Board Members, Board Odelle Quisumbing, 4 Assistant to the Secretary, Office of the Secretary, Board Achilles Sangster II, Lead Information Manager, Division of Monetary Affairs, Board Zeynep Senyuz, Special Adviser to the Board, Division of Board Members, Board Paula Tkac, Director of Research, Federal Reserve Bank of Atlanta Skander J. Van den Heuvel, Associate Director, Division of Financial Stability, Board Francisco Vazquez-Grande, Group Manager, Division of Monetary Affairs, Board Cheryl L. Venable, First Vice President, Federal Reserve Bank of Atlanta Annette Vissing-Jørgensen, Senior Adviser, Division of Monetary Affairs, Board Jeffrey D. Walker, Senior Associate Director, Division of Reserve Bank Operations and Payment Systems, Board William Wascher, Deputy Director, Division of Research and Statistics, Board Min Wei, Senior Associate Director, Division of Monetary Affairs, Board Randall A. Williams, 9 Group Manager, Division of Monetary Affairs, Board Filip Zikes, Special Adviser to the Board, Division of Board Members, Board _______________________ Joshua Gallin Secretary 1. The Federal Open Market Committee is referenced as the "FOMC" and the "Committee" in these minutes; the Board of Governors of the Federal Reserve System is referenced as the "Board" in these minutes. Return to text 2. Committee organizational documents are available at www.federalreserve.gov/monetarypolicy/rules_authorizations.htm . Return to text 3. The SLOOS results reported are based on banks' responses, weighted by each bank's outstanding loans in the respective loan category, and might therefore differ from the results reported in the published SLOOS, which are based on banks' unweighted responses. Return to text 4. Attended through the discussion of the economic and financial situation. Return to text 5. Attended the discussion of the economic and financial situation. Return to text 6. Attended through the discussion of developments in financial markets and open market operations. Return to text 7. Attended Wednesday's session only. Return to text 8. Attended from the discussion of the economic and financial situation through the end of Tuesday's session. Return to text 9. Attended the discussion of current monetary policy. Return to text

Minutes of the Federal Open Market Committee December 9–10, 2025 A joint meeting of the Federal Open Market Committee and the Board of Governors of the Federal Reserve System was held in the offices of the Board of Governors on Tuesday, December 9, 2025, at 9:00 a.m. and continued on Wednesday, December 10, 2025, at 9:00 a.m. 1 Developments in Financial Markets and Open Market Operations The manager turned first to an overview of broad market developments during the intermeeting period. Market participants did not materially change their macroeconomic outlooks and continued to interpret data made available over the intermeeting period as consistent with a resilient economy. Investors' expectations for the path of the policy rate, whether market based or survey based, were little changed, on net, over the period. Market participants and respondents to the Open Market Desk's Survey of Market Expectations (Desk survey) generally expected a 25 basis point reduction in the target range for the federal funds rate at the December FOMC meeting, and the modal outlook from the survey as well as from options pricing implied two additional rate cuts next year. The manager turned next to developments in Treasury markets and market-based measures of inflation compensation. Treasury yields rose a little over the intermeeting period, on net, but remained within recent ranges. Inflation compensation moved lower over the period, particularly for shorter tenors. The manager attributed the decline in inflation compensation at shorter tenors to lower energy prices as well as a reassessment by some market participants of the likely effect of tariffs on near-term inflation. In contrast to market-based measures of inflation compensation, survey- and model- based measures of inflation expectations were little changed over the intermeeting period. Broad equity price indexes were volatile but changed little, on net, over the intermeeting period. Equity prices showed sensitivity to economic data and policymaker communications. Developments regarding artificial intelligence (AI) also contributed to the volatility of the stock prices of the largest technology companies. The manager noted that capital expenditures on equipment and infrastructure related to AI by a set of large technology companies accelerated this year and that these firms were increasingly relying on debt to finance such expenditures. Regarding international developments, the trade-weighted dollar index was little changed over the intermeeting period. Outside forecasters continued to expect that the dollar would depreciate modestly next year. Many of these forecasters expected a larger reduction in policy rates in the U.S. than in other advanced-economy jurisdictions, though their confidence in this view appeared to diminish somewhat in light of the resilience of the U.S. economy. The manager noted that money market conditions continued to tighten over the intermeeting period and that the staff assessed that conditions were consistent with the level of reserves having declined to the ample region. Rates on Treasury repurchase agreements (repo) remained relatively elevated and volatile over the intermeeting period. Investors attributed firmness in repo rates to a decline in available liquidity and continued large Treasury debt issuance. Higher repo rates, along with a lower level of reserves, continued to contribute to upward pressure on the spread between the effective federal funds rate (EFFR) and the interest rate on reserve balances. The manager noted that the correlation between this spread and the level of reserve balances had risen notably over the past couple of months and that the EFFR had moved up faster than it had during the previous episode of balance sheet runoff. Consistent with elevated repo rates, usage of overnight reverse repo operations remained low, while both the frequency and volume of standing repo operations increased over the intermeeting period. Some other key indicators of reserve ampleness, such as the share of payments by banks occurring later in the day and the share of domestic banks borrowing in the federal funds market, also pointed to ample reserve conditions. The manager next discussed the expected trajectory of key components of the Federal Reserve's balance sheet. Over the next several months, seasonal fluctuations in nonreserve liabilities were projected to lead to significant declines in reserves at the end of December, in late January, and especially in mid-to-late April if securities holdings in the System Open Market Account (SOMA) were to remain unchanged. The manager noted that the projected fall in reserves in April caused by tax inflows to the Treasury General Account (TGA)—which is a Federal Reserve liability—was particularly large and thus judged that reserves were likely to fall below the ample range if the size of the SOMA portfolio were to remain unchanged. In light of this projected decline in reserves as well as recent developments in money markets, the manager recommended that the Committee consider starting reserve management purchases (RMPs) this month to maintain an ample level of reserves on an ongoing basis. Because of the substantial projected decline in reserves in mid-to-late April, the manager judged that it would be prudent to start RMPs soon, maintain a somewhat elevated pace of net purchases until then, and then decrease the monthly pace substantially thereafter. Respondents to the Desk survey expected RMPs to begin soon. Over one-third of respondents expected RMPs to be announced at this meeting and begin by next month, and most respondents anticipated them to begin before the end of the first quarter of 2026. While the estimated size of expected purchases varied considerably across respondents, on average, respondents anticipated net purchases of about $220 billion over the first 12 months of purchases. The manager then turned to a discussion of standing repo operations and the essential role they play in supporting the implementation of monetary policy. While usage of these operations had increased recently, there had been days when a large volume of repo trades occurred well above the operations' minimum bid rate, suggesting reluctance by some potential participants to engage in standing repo operations. Market outreach suggested that this reluctance reflected misperceptions about the intended purpose of standing repo operations and that the effectiveness of these operations could be enhanced by Federal Reserve communications that explicitly clarified that the purpose of the operations is to support monetary policy implementation. Market participants also suggested that reluctance to use standing repo operations reflected in part specific operational features, and they offered a number of suggestions to enhance the effectiveness of the operations, such as allowing them to be centrally cleared and eliminating the aggregate limit of $500 billion per day. Given the importance of standing repo operations for monetary policy implementation, the manager proposed to clarify their intended role in official communications, convey the expectation that they would be used when economically sensible, and eliminate their aggregate limit. By unanimous vote, the Committee ratified the Desk's domestic transactions over the intermeeting period. There were no intervention operations in foreign currencies for the System's account during the intermeeting period. Special Topic: Balance Sheet Issues Participants discussed developments in money markets and whether starting RMPs was warranted to maintain reserves at levels consistent with the Committee's ample-reserves framework laid out in its 2019 Statement Regarding Monetary Policy Implementation and Balance Sheet Normalization. With the continued increases in the spreads between money market interest rates and administered rates, as well as some other indicators of tightening money market conditions, participants judged that reserve balances had declined to ample levels. Accordingly, participants assessed that it was appropriate to begin RMPs and initiate purchases of shorter-term Treasury securities to maintain an ample supply of reserves over time. The discussion was preceded by staff presentations. The staff emphasized that a range of levels of reserve balances was consistent with ample and presented indicators showing that money market conditions pointed to reserves being within the ample range. In particular, the spreads of the EFFR and of other money market rates to the interest rate on reserve balances had increased relatively quickly since mid-September. Additionally, several other indicators of liquidity in short-term funding markets, including the volatility of repo rates and their sensitivity to Treasury coupon issuance, pointed to reserves being within the ample range. The staff emphasized the role that standing repo operations had played in ensuring that the federal funds rate remained within its target range, even on days of elevated demand for nonreserve liabilities. The staff also noted the implications of reserves varying within the ample range for volatility and market functioning in money markets, the size of the Federal Reserve's balance sheet, and the use of standing repo operations. The staff noted that maintaining ample reserves over time would require the SOMA security portfolio to expand to accommodate trend growth in the demand for reserves and nonreserve liabilities. In addition, under the ample-reserves framework, the size of the SOMA portfolio would need to be sufficient to accommodate significant seasonal variation in the demand for nonreserve liabilities, such as that driven by fluctuations in TGA balances. The staff presented options for how the Desk could structure RMPs to maintain an ample supply of reserves. They noted the benefits of granting the Desk flexibility to adjust the sizes of RMPs in anticipation of or in response to swings in reserve demand and the demand for nonreserve liabilities. The staff also noted that, consistent with the goal of returning to a primarily Treasury portfolio expressed in the Committee's 2022 Principles for Reducing the Size of the Federal Reserve's Balance Sheet and a preference to shift the SOMA portfolio composition toward that of Treasury securities outstanding, RMPs could be conducted primarily in Treasury bills. Participants agreed that recent money market conditions pointed to reserves being within the ample range and that beginning RMPs would be prudent to maintain a supply of ample reserves. A couple of participants remarked that the recent increase in the spread between the EFFR and the interest rate on reserve balances had been faster than during the Federal Reserve's 2017–19 runoff experience, and a couple of participants observed that triparty repo rates had been averaging somewhat above the interest rate on reserve balances. Participants expressed their preferences for purchases to be in Treasury bills so that the SOMA portfolio composition would begin to shift toward that of Treasury securities outstanding, though no decision was made on the composition of the portfolio in the long run. Policymakers generally emphasized the importance of communicating that RMPs would be made solely to ensure interest rate control and smooth market functioning and had no implications for the stance of monetary policy. Participants generally agreed that providing the Desk flexibility to adjust the size and timing of RMPs was important because of the significant variation in the demand for Federal Reserve liabilities and the uncertainty surrounding projections of this demand. When discussing how to structure RMPs in light of this variation, several participants emphasized that they preferred to front-load purchases so that the total level of reserves supplied to the market would be enough to manage large anticipated seasonal swings in nonreserve liabilities without having to rely on standing repo operations. Some other participants, however, preferred to limit balance sheet size by conducting RMPs closer to periods of elevated demand for nonreserve liabilities and relying more on standing repo operations to damp upward pressure on rates. Several participants noted that aligning variation in SOMA Treasury bill holdings with variation in nonreserve liabilities would insulate reserve supply from TGA changes, citing research by the Federal Reserve staff. Participants also discussed the role of standing repo operations and commented on their importance for interest rate control in the ample-reserves regime. Some participants emphasized their preference that standing repo operations play a more active role in rate control, with material usage during periods of elevated pressures in money markets. A couple of participants added that effective standing repo operations may allow for a smaller balance sheet on average. Several participants preferred to rely more on RMPs to maintain an ample level of reserves. Various participants noted that a more precise definition of "ample" would help clarify the Committee's intentions in implementing an ample-reserves framework. A few participants noted the difficulties of aiming to target an appropriate level of reserves because of the potential shifts in reserve demand. Some participants offered a view that an ample-reserves definition should focus on the level of money market rates in relation to the interest rate on reserve balances, with a few of those participants highlighting that such an approach would avoid some of the challenges of targeting a particular level of reserves given potential shifts in reserve demand. A couple of participants expressed the view that a definition of "ample reserves" that resulted in a larger supply of reserves than necessary to implement the Committee's framework could lead to excessive risk-taking by leveraged investors. Staff Review of the Economic Situation The information available at the time of the meeting indicated that real gross domestic product (GDP) had expanded moderately over this year. The unemployment rate had edged up and the pace of payroll employment increases had slowed through September; more recent labor market indicators were consistent with these developments. Consumer price inflation had moved up since earlier in the year and remained somewhat elevated. The unemployment rate ticked up to 4.4 percent in September, continuing the gradual upward trend seen since the middle of the year. The average monthly pace of total payroll gains continued to be slower in the third quarter than early in the year. Other available labor market indicators—such as initial claims for unemployment insurance benefits, rates of job openings and layoffs, and survey measures of households' and businesses' perceptions of the balance between labor demand and supply—were consistent with a gradual cooling in labor market conditions since September. The employment cost index for total private-sector labor compensation rose 3.5 percent over the 12 months ending in September, and average hourly earnings for all employees increased 3.8 percent over the same 12-month period. Both measures of hourly labor compensation growth were close to their year-earlier rates. Total consumer price inflation—as measured by the 12‑month change in the price index for personal consumption expenditures (PCE)—was 2.8 percent in September. Core PCE price inflation, which excludes changes in consumer energy prices and many consumer food prices, was also 2.8 percent in September. Both total and core PCE price inflation were somewhat higher than earlier in the year. Core services price inflation had moved down, but core goods price inflation had picked up, which the staff largely attributed to the effects of higher tariffs. The available indicators suggested that real GDP growth was solid in the third quarter, although the average rate of increase over the first three quarters of the year was moderate and slower than its 2024 pace. Real private domestic final purchases—which comprises PCE and private fixed investment spending and which often provides a better signal of underlying economic momentum than does GDP—appeared to have risen faster than GDP over the first three quarters of the year but also had slowed relative to last year. Real goods imports declined in August, reversing the increase in the preceding month, while real goods exports edged down further. The federal government shutdown was expected to reduce real GDP growth around 1 percentage point in the fourth quarter, with a corresponding boost to output growth in the first quarter of 2026. Foreign economic activity continued to expand at a below-trend pace in the third quarter, with real GDP having contracted in Mexico and Japan and having grown at only a lackluster pace in Europe. By contrast, economic activity in emerging Asia remained robust amid continued strong external demand for high-tech products and Chinese firms having boosted exports to markets other than the U.S. Headline inflation continued to run near central bank targets in many foreign economies, aided by declines in global energy prices so far this year. Core inflation, however, remained persistently elevated in some economies. A few foreign central banks reduced their policy rates, including the Bank of Canada and the Bank of Mexico, with most others leaving them unchanged. Staff Review of the Financial Situation Over the intermeeting period, both the market-implied expected path of the federal funds rate and nominal Treasury yields edged up on net. Changes in nominal yields reflected increases in real yields, while inflation compensation declined a bit, especially at shorter horizons. Broad equity prices were little changed. While the one-month option-implied volatility on the S&P 500 index at one point reached its highest level since early April, it ended the period roughly unchanged. Investment- and speculative-grade corporate bond spreads increased somewhat but remained at low levels. In foreign financial markets, longer-term yields increased notably over the intermeeting period because of various country-specific factors, including stronger-than-expected employment gains in Canada and rising odds of further monetary policy tightening and fiscal expansion in Japan. In addition, in the euro area, stronger-than-expected data on economic activity and European Central Bank communications regarded as signaling less accommodative policy contributed to rising yields. Foreign equity indexes and the broad dollar index were little changed, on net, over the intermeeting period. Conditions in U.S. short-term funding markets remained orderly but were generally tighter over the intermeeting period. In secured markets, liquidity conditions were tighter, on average, amid robust Treasury issuance, declining reserve balances in recent months, and month-end pressures. Over the intermeeting period, the average level of reserve balances was around $2.9 trillion, about $500 billion lower relative to the level of reserve balances at the start of the Federal Reserve's balance sheet reductions in June 2022. In domestic credit markets, conditions for businesses, households, and municipalities were little changed on balance. Financing conditions remained somewhat restrictive for households and small businesses. Meanwhile, large and midsize businesses continued to access credit markets at a solid pace. Credit performance was largely unchanged, with delinquency rates for small businesses, commercial real estate (CRE), and consumer loans remaining elevated. Yields on corporate bonds increased somewhat. Rates on 30-year fixed-rate conforming residential mortgages, as well as yields on non-agency commercial mortgage-backed securities (CMBS), rose moderately. Credit remained generally available to most businesses, households, and municipalities. Bank loans expanded at a solid pace, and issuance in public and private credit markets was strong, as relatively high interest rates did not appear to significantly restrain borrowing in these markets. By contrast, indicators of credit growth for households and small businesses remained sluggish amid high borrowing costs. Credit performance was little changed in most markets, and credit quality for corporate bonds and leveraged loans had not shown signs of deterioration following two high-profile bankruptcy filings in the fall. There were no nonfinancial corporate bond defaults in September or October, bringing the 12-month trailing default rate below the 35th percentile of its post–Global Financial Crisis distribution. The 12-month trailing default rate for leveraged loans declined a bit in October but remained at an elevated level. Delinquency rates on CRE loans at banks were largely unchanged in the third quarter and remained above pre-pandemic levels, while CMBS delinquency rates had moved sideways since the beginning of the year. Measures of credit performance for household debt were little changed recently. Staff Economic Outlook Relative to the forecast prepared for the October meeting, real GDP growth was projected to be modestly faster, on balance, through 2028, primarily reflecting greater projected support from financial market conditions and somewhat stronger expected potential output growth. After 2025, GDP growth was expected to remain above potential through 2028 as the drag from higher tariffs waned and fiscal policy and financial market conditions continued to support spending. As a result, the unemployment rate was expected to decline gradually after this year and reach a level a little below the staff's estimate of the natural rate of unemployment by 2027. The staff's inflation forecast for 2025 and 2026 was a little lower, on balance, than the one prepared for the October meeting but similar for 2027 and 2028. Tariff increases were expected to continue to put upward pressure on inflation this year and next. Thereafter, inflation was projected to return to its previous disinflationary trend and to reach 2 percent in 2028. The staff still viewed the uncertainty around the forecast as elevated, given cooling labor market conditions, still-elevated inflation, and the uncertainty about government policy changes and their effects on the economy. Risks around the forecasts for employment and real GDP growth continued to be seen as skewed to the downside, as softening labor market conditions and elevated economic uncertainty raised the risk of a sharper-than-expected weakening in the economy. Risks around the inflation forecast continued to be seen as skewed to the upside, with the upward pressure on inflation this year and next—after more than four years of inflation being above 2 percent—raising the possibility that inflation would prove to be more persistent than the staff expected. Participants' Views on Current Conditions and the Economic Outlook In conjunction with this FOMC meeting, participants submitted their projections of the most likely outcomes for real GDP growth, the unemployment rate, and inflation for each year from 2025 through 2028 and over the longer run. The projections were based on participants' individual assessments of appropriate monetary policy, including their projections of the federal funds rate. Participants also provided their individual assessments of the level of uncertainty and the balance of risks associated with their projections. The Summary of Economic Projections was released to the public after the meeting. Participants observed that overall inflation had moved up through September since earlier in the year and remained somewhat above the Committee's 2 percent longer-run goal, but more recent inflation data produced by the government were unavailable. Most participants remarked that core inflation had been pushed up by higher tariffs that boosted goods prices, even as some participants noted that housing services inflation had moved down closer to levels seen during previous periods when inflation was near 2 percent. A couple of participants commented that inflation in some nonmarket services categories had been affected by special factors, and thus were unlikely to provide a clear signal about broader inflationary pressures. A majority of participants remarked that overall inflation had been above target for some time and had not moved closer to the 2 percent objective over the past year. Regarding the outlook for inflation, participants generally expected inflation to remain somewhat elevated in the near term before moving gradually to 2 percent. Many participants emphasized that they expected that the effects of tariffs on core goods inflation would wane, although some expressed uncertainty about when these effects would diminish or the extent to which tariffs would ultimately be passed through to final goods prices. Some participants stated that their business contacts had reported persistent input cost pressures unrelated to tariffs, although several of these participants noted that weaker demand limited the ability of some firms to raise prices or that business productivity gains might enable some firms to manage these cost pressures. A majority of participants expected continued disinflation in housing services, and a few participants expected continued disinflation in core nonhousing services. Participants generally judged that the risks to inflation remained tilted to the upside, although several participants commented that they considered these upside risks to have decreased. Some participants highlighted the risk that elevated inflation might prove more persistent than expected. Participants noted that market- and survey-based measures of longer-term inflation expectations remained stable. A few participants remarked that measures of near-term inflation expectations had been elevated earlier in 2025 but had declined from those peaks. Participants emphasized the importance of maintaining well-anchored longer-run inflation expectations to help return inflation to the Committee's 2 percent objective in a timely manner, and some participants noted concerns that a more prolonged period of above-target inflation could risk an increase in longer-run expectations. With regard to the labor market, participants observed that labor market conditions had continued to soften and that the unemployment rate had edged up in September. Participants reported relying on private-sector and limited government data, as well as information provided by businesses and community contacts, to assess more recent labor market conditions. Most participants remarked that some of the most recent indicators of labor market conditions, including survey-based measures of job availability or reports of planned layoffs, pointed to continued softening. Some participants noted, however, that other indicators, such as weekly initial unemployment insurance claims and measures of job postings, suggested more stability. Several participants commented that lower-income households were especially concerned about their employment prospects. Participants observed that hiring had remained subdued, and some participants pointed to survey-based measures or reports from business contacts that suggested that current hiring plans remained muted. Participants generally viewed the low dynamism in the labor market as reflecting both lower labor demand amid economic uncertainty or efforts by businesses to contain costs and decreased labor supply associated with lower immigration, the aging of the population, or reduced labor force participation. Participants generally assessed that, under appropriate monetary policy, the labor market likely would stabilize next year but noted that their outlook for the labor market was still quite uncertain, especially amid the delays in the release of government data. Most participants judged that risks to the labor market remained tilted to the downside. Several participants viewed the rise in the unemployment rates for groups historically more sensitive to cyclical changes in economic activity, the possibility that layoffs could push the unemployment rate sharply higher in a low-hiring environment, or the concentration of job gains in a few less cyclically sensitive sectors as potentially signaling greater fragility in the labor market. Participants observed that overall economic activity appeared to be expanding at a moderate pace. Many participants viewed aggregate consumption spending as solid, although several pointed to signs of some recent slowing. A majority of participants mentioned evidence of stronger spending growth for higher-income households, while lower-income households had become increasingly price sensitive and were making adjustments to their spending in response to the outsized cumulative increase in the prices of basic goods and services over the past several years. A couple of participants remarked that the housing sector showed some signs of stabilizing and that recent declines in mortgage rates would provide support to the sector. Some participants commented that economic activity had also been supported by robust business fixed investment, with several pointing to investment by the technology sector in particular. A couple of participants commented that the agricultural sector continued to face headwinds because of high input costs or reduced capacity in the food processing industry even though prices for many agricultural products had risen over the past year. Several participants noted that there could be swings in measures of economic activity associated with the government shutdown, which could make it more difficult over coming months to determine the underlying trend in growth. Participants generally anticipated that the pace of economic growth would pick up in 2026 and that, in the medium term, economic activity would expand at about the same pace as potential output. Many participants expected growth to be supported by fiscal policy, changes in regulatory policy, or somewhat favorable financial market conditions. Nevertheless, participants judged that uncertainty about their forecast of real GDP growth remained high. Moreover, a number of participants noted that structural factors such as technological progress and higher productivity growth, possibly reflecting increasing use of AI, could boost economic growth without generating price pressures and could also damp job creation. These participants remarked that it could be difficult in real time to determine the extent to which economic conditions reflect such structural factors as opposed to cyclical ones. In their consideration of monetary policy at this meeting, participants noted that inflation had moved up since earlier in the year and remained somewhat elevated. Participants further noted that available indicators suggested that economic activity had been expanding at a moderate pace. They observed that job gains had slowed this year and that the unemployment rate had edged up through September. Participants assessed that more recent indicators were consistent with these developments. In addition, they judged that downside risks to employment had risen in recent months. Against this backdrop, most participants supported lowering the target range for the federal funds rate at this meeting, while some preferred to keep the target range unchanged. A few of those who supported lowering the policy rate at this meeting indicated that the decision was finely balanced or that they could have supported keeping the target range unchanged. Those who favored lowering the target range for the federal funds rate generally judged that such a decision was appropriate because downside risks to employment had increased in recent months and upside risks to inflation had diminished since earlier in 2025 or were little changed. Some of these participants emphasized that lowering the target range for the federal funds rate at this meeting was in line with a forward-looking approach to the pursuit of the Committee's dual-mandate objectives. These participants noted that reducing the policy rate at this meeting would be consistent with the projected decline in inflation over coming quarters while contributing to a strengthening of economic activity in 2026 that would help stabilize labor market conditions after this year's cooling. Those who preferred to keep the target range for the federal funds rate unchanged at this meeting expressed concern that progress toward the Committee's 2 percent inflation objective had stalled in 2025 or indicated that they needed to have more confidence that inflation was being brought down sustainably to the Committee's objective. These participants also noted that longer-term inflation expectations could rise should inflation not return to 2 percent in a timely manner. Some participants who favored or could have supported keeping the target range unchanged suggested that the arrival of a considerable amount of labor market and inflation data over the coming intermeeting period would be helpful in making judgments on whether a rate reduction was warranted. A few participants judged that lowering the federal funds rate target range at this meeting was not justified because data received over the intermeeting period did not suggest any significant further weakening in the labor market. One participant agreed with the need to move toward a more neutral monetary policy stance but preferred lowering the target range by 1/2 percentage point at this meeting. In considering the outlook for monetary policy, participants expressed a range of views about the restrictiveness of the Committee's policy stance. Most participants judged that further downward adjustments to the target range for the federal funds rate would likely be appropriate if inflation declined over time as expected. With respect to the extent and timing of additional adjustments to the target range for the federal funds rate, some participants suggested that, under their economic outlooks, it would likely be appropriate to keep the target range unchanged for some time after a lowering of the range at this meeting. A few participants observed that such an approach would allow policymakers to assess the lagged effects on the labor market and economic activity of the Committee's recent moves toward a more neutral policy stance while also giving policymakers time to acquire more confidence about inflation returning to 2 percent. All participants agreed that monetary policy was not on a preset course and would be informed by a wide range of incoming data, the evolving economic outlook, and the balance of risks. In discussing risk-management considerations that could bear on the outlook for monetary policy, participants generally judged that upside risks to inflation remained elevated and that downside risks to employment were elevated and had increased since the middle of 2025. Most participants noted that a move toward a more neutral policy stance would help forestall the possibility of a major deterioration in labor market conditions. Many of these participants also judged that the available evidence pointed to a reduced probability that tariffs would lead to persistent inflation pressures. These participants observed that it was appropriate for the Committee to ease its policy stance in response to downside risks to employment, thereby helping to bring the risks to achieving the dual-mandate goals into better balance, and suggested that a move toward a more neutral policy stance at this meeting would leave policymakers well positioned to determine the extent and timing of additional adjustments to the policy rate, with these judgments being based on the incoming data, the evolving outlook, and the balance of risks. By contrast, several participants pointed to the risk of higher inflation becoming entrenched and suggested that lowering the policy rate further in the context of elevated inflation readings could be misinterpreted as implying diminished policymaker commitment to the 2 percent inflation objective. Participants judged that a careful balancing of risks was required and agreed on the importance of well-anchored longer-term inflation expectations in achieving the Committee's dual-mandate objectives. Committee Policy Actions In their discussions of the monetary policy decision for this meeting, members agreed that available indicators suggested that economic activity had been expanding at a moderate pace. They also agreed that job gains had slowed this year and that the unemployment rate had edged up through September. Members observed that more recent indicators were consistent with these developments. They noted that inflation had moved up since earlier in the year and remained somewhat elevated. They agreed that the Committee was attentive to the risks to both sides of its dual mandate and that downside risks to employment had risen in recent months. In support of the Committee's goals and in light of the shift in the balance of risks, nine members agreed to lower the target range for the federal funds rate by 1/4 percentage point to 3-1/2 to 3-3/4 percent. Three members voted against that decision; two preferred to leave the target range unchanged, while the other preferred to lower the target range 1/2 percentage point. Members agreed that, in considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee would carefully assess incoming data, the evolving outlook, and the balance of risks. All members agreed that the postmeeting statement should relay this judgment about additional rate adjustments and that it also should affirm their strong commitment both to supporting maximum employment and to returning inflation to the Committee's 2 percent objective. Members agreed that, in assessing the appropriate stance of monetary policy, the Committee would continue to monitor the implications of incoming information for the economic outlook. They would be prepared to adjust the stance of monetary policy as appropriate if risks emerged that could impede the attainment of the Committee's goals. Members also agreed that their assessments would take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments. In light of the meeting's discussion of balance sheet considerations, members agreed that reserve balances had declined to ample levels and that the Committee would initiate purchases of shorter-term Treasury securities as needed to maintain an ample supply of reserves on an ongoing basis. They also agreed to remove the aggregate limit on standing repo operations. At the conclusion of the discussion, the Committee voted to direct the Federal Reserve Bank of New York, until instructed otherwise, to execute transactions in the SOMA in accordance with the following domestic policy directive, for release at 2:00 p.m.: "Effective December 11, 2025, the Federal Open Market Committee directs the Desk to: Undertake open market operations as necessary to maintain the federal funds rate in a target range of 3-1/2 to 3-3/4 percent. Conduct standing overnight repurchase agreement operations at a rate of 3.75 percent. Conduct standing overnight reverse repurchase agreement operations at an offering rate of 3.5 percent and with a per-counterparty limit of $160 billion per day. Increase the System Open Market Account holdings of securities through purchases of Treasury bills and, if needed, other Treasury securities with remaining maturities of 3 years or less to maintain an ample level of reserves. Roll over at auction all principal payments from the Federal Reserve's holdings of Treasury securities. Reinvest all principal payments from the Federal Reserve's holdings of agency securities into Treasury bills." The vote also encompassed approval of the statement below for release at 2:00 p.m.: "Available indicators suggest that economic activity has been expanding at a moderate pace. Job gains have slowed this year, and the unemployment rate has edged up through September. More recent indicators are consistent with these developments. Inflation has moved up since earlier in the year and remains somewhat elevated. The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty about the economic outlook remains elevated. The Committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment rose in recent months. In support of its goals and in light of the shift in the balance of risks, the Committee decided to lower the target range for the federal funds rate by 1/4 percentage point to 3-1/2 to 3-3/4 * percent. In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective. In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals. The Committee's assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments. The Committee judges that reserve balances have declined to ample levels and will initiate purchases of shorter-term Treasury securities as needed to maintain an ample supply of reserves on an ongoing basis." Voting for this action: Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michael S. Barr; Michelle W. Bowman; Susan M. Collins; Lisa D. Cook; Philip N. Jefferson; Alberto G. Musalem; and Christopher J. Waller. Voting against this action: Stephen I. Miran, who preferred to lower the target range for the federal funds rate by 1/2 percentage point at this meeting; and Austan D. Goolsbee and Jeffrey R. Schmid, who preferred no change to the target range for the federal funds rate at this meeting. Consistent with the Committee's decision to lower the target range for the federal funds rate to 3-1/2 to 3-3/4* percent, the Board of Governors of the Federal Reserve System voted unanimously to lower the interest rate paid on reserve balances to 3.65 percent, effective December 11, 2025. The Board of Governors of the Federal Reserve System voted unanimously to approve a 1/4 percentage point decrease in the primary credit rate to 3.75 percent, effective December 11, 2025. 2 It was agreed that the next meeting of the Committee would be held on Tuesday–Wednesday, January 27–28, 2026. The meeting adjourned at 10:30 a.m. on December 10, 2025. Notation Vote By notation vote completed on November 18, 2025, the Committee unanimously approved the minutes of the Committee meeting held on October 28–29, 2025. Attendance Jerome H. Powell, Chair John C. Williams, Vice Chair Michael S. Barr Michelle W. Bowman Susan M. Collins Lisa D. Cook Austan D. Goolsbee Philip N. Jefferson Stephen I. Miran Alberto G. Musalem Jeffrey R. Schmid Christopher J. Waller Beth M. Hammack, Neel Kashkari, Lorie K. Logan, Anna Paulson, and Sushmita Shukla, Alternate Members of the Committee Thomas I. Barkin, Raphael W. Bostic, and Mary C. Daly, Presidents of the Federal Reserve Banks of Richmond, Atlanta, and San Francisco, respectively Joshua Gallin, Secretary Matthew M. Luecke, Deputy Secretary Brian J. Bonis, Assistant Secretary Michelle A. Smith, Assistant Secretary Mark E. Van Der Weide, General Counsel Richard Ostrander, Deputy General Counsel Trevor A. Reeve, Economist Stacey Tevlin, Economist Beth Anne Wilson, Economist Shaghil Ahmed, Brian M. Doyle, Eric M. Engen, 3 Carlos Garriga, Joseph W. Gruber, William Wascher, and Egon Zakrajšek, Associate Economists Roberto Perli, Manager, System Open Market Account Julie Ann Remache, Deputy Manager, System Open Market Account Jose Acosta, Senior System Engineer II, Division of Information Technology, Board Sriya Anbil, Group Manager, Division of Monetary Affairs, Board Alyssa Arute, 4 Assistant Director, Division of Reserve Bank Operations and Payment Systems, Board Alessandro Barbarino, Special Adviser to the Board, Division of Board Members, Board Michael Blume, Principal Software Developer, Division of Monetary Affairs, Board Camille Bryan, Senior Project Manager, Division of Monetary Affairs, Board Mark A. Carlson, Senior Adviser, Division of Monetary Affairs, Board Michele Cavallo, Special Adviser to the Board, Division of Board Members, Board Stephanie E. Curcuru, Deputy Director, Division of International Finance, Board Marnie Gillis DeBoer, Senior Associate Director, Division of Monetary Affairs, Board Laura J. Feiveson, Special Adviser to the Board, Division of Board Members, Board Andrew Figura, Senior Associate Director, Division of Research and Statistics, Board Jonas Fisher, Senior Vice President, Federal Reserve Bank of Chicago Glenn Follette, Associate Director, Division of Research and Statistics, Board Greg Frischmann, Senior Special Counsel, Legal Division, Board; Special Adviser to the Board, Division of Board Members, Board Jenn Gallagher, Assistant to the Board, Division of Board Members, Board Brian Gowen, 4 Capital Markets Trading Principal, Federal Reserve Bank of New York Christopher J. Gust, 4 Associate Director, Division of Monetary Affairs, Board James Hebden, Principal Economic Modeler, Division of Monetary Affairs, Board Gabriel Herman, 4 Quantitative Principal, Federal Reserve Bank of New York Valerie S. Hinojosa, Section Chief, Division of Monetary Affairs, Board Jane E. Ihrig, Special Adviser to the Board, Division of Board Members, Board Michael T. Kiley, Deputy Director, Division of Monetary Affairs, Board Kyungmin Kim, 4 Principal Economist, Division of Monetary Affairs, Board Elizabeth Klee, Deputy Director, Division of Monetary Affairs, Board Eric J. Kollig, Special Assistant to the Board, Division of Board Members, Board Anna R. Kovner, Executive Vice President, Federal Reserve Bank of Richmond Andreas Lehnert, Director, Division of Financial Stability, Board Eric LeSueur, 4 Policy and Market Analysis Advisor, Federal Reserve Bank of New York Kurt F. Lewis, Special Adviser to the Chair, Division of Board Members, Board Logan T. Lewis, Section Chief, Division of International Finance, Board Laura Lipscomb, Special Adviser to the Board, Division of Board Members, Board Edith Liu, Section Chief, Division of Monetary Affairs, Board Benjamin W. McDonough, Deputy Secretary and Ombudsman, Office of the Secretary, Board Andrew Meldrum, 4 Associate Director, Division of Monetary Affairs, Board Jason Miu, 4 Associate Director, Federal Reserve Bank of New York Linsey Molloy, 4 Associate Director, Federal Reserve Bank of New York Raven Molloy, Deputy Associate Director, Division of Research and Statistics, Board Fernanda Nechio, Vice President, Federal Reserve Bank of San Francisco Edward Nelson, Senior Adviser, Division of Monetary Affairs, Board Giovanni Nicolò, Principal Economist, Division of Monetary Affairs, Board Anna Nordstrom, Head of Markets, Federal Reserve Bank of New York Alyssa T. O'Connor, Special Adviser to the Board, Division of Board Members, Board Michael G. Palumbo, Senior Associate Director, Division of Research and Statistics, Board Matthias Paustian, Assistant Director, Division of Research and Statistics, Board Paolo A. Pesenti, Director of Monetary Policy Research, Federal Reserve Bank of New York Caterina Petrucco-Littleton, 5 Deputy Associate Director, Division of Consumer and Community Affairs, Board; Special Adviser to the Board, Division of Board Members, Board Eugenio P. Pinto, Special Adviser to the Board, Division of Board Members, Board Odelle Quisumbing, 6 Assistant to the Secretary, Office of the Secretary, Board Andrea Raffo, Senior Vice President, Federal Reserve Bank of Minneapolis William E. Riordan, 4 Capital Markets Trading Advisor, Federal Reserve Bank of New York Romina D. Ruprecht, 4 Senior Economist, Division of Monetary Affairs, Board Zeynep Senyuz, Special Adviser to the Board, Division of Board Members, Board Donald Keith Sill, Interim Director of Research, Federal Reserve Bank of Philadelphia James M. Trevino, 4 Principal Economic Modeler, Division of Monetary Affairs, Board Skander J. Van den Heuvel, Associate Director, Division of Financial Stability, Board Willem Van Zandweghe, Vice President, Federal Reserve Bank of Cleveland Clara Vega, Deputy Associate Director, Division of Research and Statistics, Board Annette Vissing-Jørgensen, Senior Adviser, Division of Monetary Affairs, Board Jeffrey D. Walker, 4 Senior Associate Director, Division of Reserve Bank Operations and Payment Systems, Board Min Wei, Senior Associate Director, Division of Monetary Affairs, Board Randall A. Williams, Group Manager, Division of Monetary Affairs, Board Jonathan Willis, Vice President, Federal Reserve Bank of Atlanta Rebecca Zarutskie, Senior Vice President, Federal Reserve Bank of Dallas _______________________ Joshua Gallin Secretary 1. The Federal Open Market Committee is referenced as the "FOMC" and the "Committee" in these minutes; the Board of Governors of the Federal Reserve System is referenced as the "Board" in these minutes. Return to text 2. In taking this action, the Board approved requests to establish that rate submitted by the Board of Directors of the Federal Reserve Banks of New York, Philadelphia, St. Louis, and San Francisco. The vote also encompassed approval by the Board of Governors of the establishment of a 3.75 percent primary credit rate by the remaining Federal Reserve Banks, effective on December 11, 2025, or the date such Reserve Banks inform the Secretary of the Board of such a request. (Secretary's note: Subsequently, the Federal Reserve Banks of Boston, Cleveland, Richmond, Atlanta, Chicago, Minneapolis, Kansas City, and Dallas were informed of the Board's approval of their establishment of a primary credit rate of 3.75 percent, effective December 11, 2025.) Return to text 3. Attended from the discussion of the economic and financial situation through the end of Wednesday's session. Return to text 4. Attended through the discussion of balance sheet issues. Return to text 5. Attended Tuesday's session only. Return to text 6. Attended through the discussion of balance sheet issues and the discussion of monetary policy. Return to text * On December 30, 2025, shortly after publication, two references to the upper bound of the federal funds rate target range in the HTML version of the December Minutes were corrected from “3-1/4” to “3-3/4” percent. The PDF version of these Minutes was unchanged. Return to text

Minutes of the Federal Open Market Committee October 28–29, 2025 A joint meeting of the Federal Open Market Committee and the Board of Governors of the Federal Reserve System was held in the offices of the Board of Governors on Tuesday, October 28, 2025, at 9:00 a.m. and continued on Wednesday, October 29, 2025, at 9:00 a.m. 1 Developments in Financial Markets and Open Market Operations The manager turned first to an overview of broad market developments during the intermeeting period. Market participants left their macroeconomic outlooks little changed, and they appeared to continue to interpret data made available over the period as consistent with a resilient economy. In line with the stable outlook, investors' expectations for the path of the policy rate, whether market based or survey based, were virtually unchanged over the period. Investors expected a 25 basis point lowering in the target range for the federal funds rate at the October meeting and another 25 basis point lowering at the December meeting, although some uncertainty around the December meeting was evident in responses to the Open Market Desk's Survey of Market Expectations (Desk survey) as well as in market prices. The manager turned next to developments in Treasury markets and market-based measures of inflation compensation. Treasury yields were little changed, on net, over the period, consistent with stable expectations for the policy rate. Inflation compensation moved lower over the period, particularly for shorter tenors, with staff models attributing these recent movements to temporary factors. Broad equity indexes continued to rise over the period, with the largest technology companies performing strongly on market participants' optimism about artificial intelligence (AI). The manager noted that rising stock prices were consistent with expectations for continued robust growth in earnings. Corporate bond spreads increased a bit this period but remained low in absolute terms. A couple of well-publicized bankruptcies, as well as some credit losses reported by some banks, led to increased investor scrutiny of credit markets, with investors reportedly closely tracking the riskiest segments of credit markets for signs of weakening and noting the possibility of future losses. Regarding international developments, the manager noted that the trade-weighted dollar index rose somewhat over the period. Despite its recent appreciation, the dollar remained weaker against all major currencies since the beginning of the year, and outside forecasters continued to expect that the dollar would depreciate modestly over the medium term. The manager highlighted that recent changes in money market conditions indicated that the level of reserves could be approaching ample. Rates on Treasury repurchase agreements (repo) moved notably higher relative to the interest rate on reserve balances (IORB). Investors attributed this movement to a decline in available liquidity amid ongoing balance sheet runoff and continued large Treasury debt issuance. Higher repo rates induced a fairly rapid increase in the effective federal funds rate (EFFR) relative to the IORB, with signs that the EFFR might increase further. The manager noted this increase was widespread, with many participants paying higher rates in the federal funds market regardless of their reasons for borrowing. Consistent with the move higher in repo rates, the overnight reverse repurchase agreement (ON RRP) facility had seen usage fall to de minimis levels. Meanwhile, the standing repo facility (SRF) was used more frequently over the period, albeit not in large volumes. Pressures in money markets resulted in notable movements in some other indicators of reserve ampleness. For example, payments by banks shifted to later in the day, suggesting that banks may have been economizing on reserves. In addition, the share of domestic banks borrowing in the federal funds market increased. The estimated elasticity of the EFFR with respect to changes in the supply of reserves was stable during the period. That outcome, however, was likely due to the aftereffects of the debt ceiling resolution, which likely affected the estimated elasticity. A related concept, the elasticity of repo rates to changes in repo volumes, increased significantly since late August. The manager recommended that the Committee consider stopping the runoff of the System Open Market Account (SOMA) portfolio soon. Continuing runoff would imply that volatility in money markets likely would continue to intensify. He noted that excessive money market rate volatility would pose risks to both the control of the policy rate and the stability of funding in the repo market, which in turn could affect the stability of the U.S. Treasury market. The manager also noted that further reductions in the size of the portfolio may prove short lived because they would bring forward the time when the Desk would need to restart purchases of securities to maintain ample reserves. The manager next discussed the expected trajectory of the balance sheet. Respondents to the Desk survey had come to expect an earlier date for the end of portfolio runoff. Market outreach suggested further revisions to expectations in the week after the survey concluded, and the staff estimated that if respondents had been asked more recently, almost half would have said they expected the Committee to announce an end to runoff at this meeting. In the absence of material take-up at the ON RRP facility, and assuming balance sheet runoff would end, the staff estimated that reserves would continue to gradually decline amid projected increases in other Federal Reserve liabilities. At times, such as during quarter- and year-ends and tax dates, reserves were projected to dip to quite low levels. Against this backdrop, the staff would continue to monitor indicators of reserve conditions closely. The manager noted that the Desk would begin using a new trading platform in the near future to conduct its repo and reverse repo operations, with other operations to follow in coming quarters. In addition, he informed the Committee that there were no intervention operations in foreign currencies for the SOMA during the intermeeting period. By unanimous vote, the Committee ratified the Desk's domestic transactions over the intermeeting period. Special Topic: The Standing Repo Facility The staff provided background on the SRF, including potential benefits and costs of central clearing for SRF transactions. The main potential benefit mentioned was greater effectiveness of the SRF in helping to maintain control of the federal funds rate. Central clearing could increase counterparties' willingness to use the SRF when there is upward pressure on repo rates, which would damp pressures on the federal funds rate. The main potential costs mentioned were increased systemic importance of providers of central clearing, the potential for central clearing of the SRF to enable greater nonbank leverage in the Treasury market, and the expansion of the Federal Reserve's footprint in financial markets. Most participants commented on the potential for central clearing of SRF transactions. 2 Among those who commented, almost all noted that the SRF supports the effective implementation and transmission of monetary policy as well as smooth market functioning, and that central clearing of SRF transactions could improve the effectiveness of the facility. A few participants raised concerns about risks associated with centrally clearing the SRF, including increased systemic importance of providers of central clearing. Participants who commented generally supported further study of central clearing of SRF transactions. Special Topic: Balance Sheet Issues The FOMC's "Plans for Reducing the Size of the Federal Reserve's Balance Sheet," announced in May 2022, indicated that the Committee intended to cease balance sheet runoff when reserve balances are judged to be somewhat above a level consistent with ample reserves. Since then, the size of the Federal Reserve's balance sheet had declined substantially. In addition, money market conditions had tightened recently, which suggested that reserve balances may be moving closer to ample. In light of these developments, participants discussed whether to stop balance sheet runoff soon and what the maturity composition of the SOMA Treasury portfolio (SOMA portfolio) should be in the longer run. Views on the latter would guide the investment of principal payments received on the Federal Reserve's holdings of agency securities as well as the composition of securities to be purchased once reserve management purchases would be needed. Consequently, participants agreed that their discussions at this meeting would help inform the Committee's future decisions regarding the long-run composition of the SOMA portfolio. The participants' discussion was preceded by a staff presentation. The staff reviewed the composition of the SOMA portfolio and provided some considerations regarding the SOMA portfolio's long-run composition, including issues related to market functioning, potential macroeconomic implications, interactions with the Treasury's management of the federal debt, monetary policy implementation, and the Federal Reserve's net income. The presentation noted that the current share of Treasury bills in the SOMA portfolio was smaller than the bill share of total Treasury securities outstanding. The staff also noted that if the Committee preferred a SOMA portfolio with a proportional or greater share of Treasury bills relative to total outstanding, policymakers could wait to make that decision because the current share of Treasury bills in the portfolio was small and the monthly amounts of principal payments received on the Federal Reserve's holdings of agency securities that would need to be reinvested once balance sheet runoff stopped were modest. Participants agreed that the recent tightening in money market conditions indicated that it would soon be appropriate to end balance sheet runoff and that reinvestments of principal payments received on agency securities holdings should be directed into Treasury bills. Various participants highlighted the need to continue to monitor money market conditions. Participants also agreed that a larger share of Treasury bills than the current portfolio allocation would be desirable in the long run. A larger share of Treasury bills would shift the SOMA portfolio composition toward that of Treasury securities outstanding. Many participants indicated that a greater share of Treasury bills could provide the Federal Reserve with more flexibility to accommodate changes in the demand for reserves or changes in nonreserve liabilities and thereby help to maintain an ample level of reserves. Several participants also noted that a greater share of Treasury bills could increase flexibility for future monetary policy accommodation without having to raise the level of reserves. The majority of participants indicated that a larger share of Treasury bills would also reduce Federal Reserve income volatility. Some participants indicated that during a transition phase, purchases to reach a larger share of Treasury bills in the SOMA portfolio could reduce the availability of short-term Treasury securities to the private sector and potentially affect market functioning. They thus favored a measured approach to purchasing Treasury bills. A couple of other participants noted the absence of market functioning problems in past episodes when purchases focused on Treasury bills. A number of participants noted that the expected pace of paydowns of agency securities in the near term was around only $15 billion to $20 billion per month, and that redirecting these proceeds into Treasury bills once balance sheet runoff ended likely would not adversely affect market functioning. Overall, most participants favored a long-run composition of the SOMA portfolio that matched the composition of Treasury securities outstanding, indicating that a proportional allocation would provide enough flexibility and may be simpler to communicate. Some participants indicated that they favored a larger-than-proportional share of Treasury bills, citing the benefits of having even greater flexibility than available under a proportional allocation. Various participants noted that it was not necessary to decide on the long-run composition of the SOMA portfolio at this time, as the shift toward a long-run composition would take place over a number of years. Staff Review of the Economic Situation The information available at the time of the meeting indicated that growth of real gross domestic product (GDP) had moderated over the first half of the year. Information on the labor market was limited by the federal government shutdown; however, available indicators were consistent with a continued gradual cooling in the labor market without any evidence of a sharp deterioration. Consumer price inflation had moved up since earlier in the year and remained somewhat elevated. Total consumer price inflation—as measured by the 12-month change in the price index for personal consumption expenditures (PCE)—was estimated to have been 2.8 percent in September based on data from the consumer price index. Core PCE price inflation, which excludes changes in consumer energy prices and many consumer food prices, was also estimated to have been 2.8 percent in September. These estimates implied that total PCE price inflation had risen 0.5 percentage point relative to a year ago and that core PCE inflation was unchanged from its year-earlier rate. Real GDP posted a strong gain in the second quarter following a decline in the first quarter, although the average increase over the first half of the year was slower than the average pace seen over 2024. Real private domestic final purchases (PDFP)—which comprises PCE and private fixed investment and which often provides a better signal of underlying economic momentum than GDP—had risen faster than GDP over the first half but had also slowed relative to its 2024 rate of increase. PDFP growth appeared to have continued at a solid pace in the third quarter, though the government shutdown had reduced the amount of data that was available to gauge third-quarter economic activity. Available data suggested that net exports positively contributed to GDP growth in the third quarter. After falling sharply in the second quarter and then rising somewhat in July, real imports of goods appeared to have resumed falling in August. U.S. real goods exports appeared to have declined moderately in August after having increased modestly in the first half of the year. The government shutdown was expected to reduce GDP growth for as long as it continued, with a corresponding boost to growth once the government reopened and government production and purchases returned to normal levels. Recent activity indicators suggested that foreign real GDP growth slowed in the third quarter relative to the first half of the year. Growth in China softened amid fading fiscal stimulus and a persistent property-sector downturn, while indicators in Europe continued to point to subdued activity. Slower foreign growth was driven in part by weaker exports due to reduced U.S. demand and lower investment due to elevated uncertainty, likely reflecting the effects of the U.S. tariffs. Growth in some foreign economies, especially in Mexico and parts of Asia, was supported by continued strong demand for high-tech products, originating primarily from the U.S. Headline inflation was near central banks' targets in many foreign economies, aided by declines in global energy prices. However, core inflation remained elevated in some economies, notably Brazil, Mexico, and the U.K. By contrast, inflation in China continued to be subdued. In response to lackluster economic activity, some foreign central banks—including the Bank of Canada, the Sveriges Riksbank, and the Bank of Mexico—cut their policy rates further over the intermeeting period. Staff Review of the Financial Situation Over the intermeeting period, both the market-implied expected path of the federal funds rate through the end of 2026 and nominal Treasury yields were little changed on net. At short maturities, real yields rose somewhat as measures of inflation compensation decreased amid declines in oil prices. At longer maturities, real yields and inflation compensation were little changed on net. Broad equity price indexes increased moderately, boosted by technology firms with positive earnings news and AI-related investor optimism. Credit spreads were little changed, on net, and remained very low by historical standards. The one-month option-implied volatility on the S&P 500 index was largely unchanged, on net, and remained near the median of its historical distribution. Risk appetite in foreign financial markets was generally strong. On net, foreign equity indexes were moderately higher, and technology stocks outperformed in several economies, largely reflecting continued investor optimism regarding AI. Market-based policy expectations and longer-term yields declined in most major advanced foreign economies, in part because of weak economic data. By contrast, yields in Japan rose amid political developments that led to expectations for increased fiscal spending. The broad dollar index increased modestly, primarily driven by the relative strength of U.S. economic data. Conditions in U.S. short-term funding markets tightened materially over the intermeeting period but remained orderly. Late in the period, the spread between the EFFR and the IORB reached the narrowest level since the runoff of the Federal Reserve's balance sheet began in 2022. The Secured Overnight Financing Rate occasionally printed above the minimum bid rate at the SRF, and SRF take-up occurred on several days. The average usage of the ON RRP facility fell to its lowest level since 2021. Taken together, these developments suggested that reserve balances were moving closer to ample levels. In domestic credit markets, borrowing costs of businesses, households, and municipalities remained significantly lower than the highs observed in 2023 but elevated relative to their average post–Global Financial Crisis levels. Yields on corporate bonds and leveraged loans edged down. Rates on 30-year fixed-rate conforming residential mortgages were little changed on net. Yields on commercial mortgage-backed securities (CMBS) moved up modestly. Interest rates on credit card accounts edged up a touch in August. Credit remained generally available but relatively tight for small businesses. Issuance of corporate bonds, leveraged loans, and private credit was robust in recent months. Core loans on banks' books continued to increase in the third quarter, driven primarily by strong growth in commercial and industrial (C&I) lending. In the residential mortgage market, credit remained easily available for high-credit-score borrowers but less so for low-score borrowers. Consumer credit remained generally available for most households. Banks in the October Senior Loan Officer Opinion Survey on Bank Lending Practices reported, on net, an easing in bank lending conditions on C&I loans for large firms and those with low exposures to international trade. Banks also eased standards for commercial real estate loans, credit cards, and auto loans over the third quarter. The overall level of bank lending standards aggregated across all loan categories was estimated to be around the median level observed since 2011. Credit quality was generally stable at levels somewhat weaker than during the pre-pandemic period. The credit performance of corporate bonds, leveraged loans, and private credit remained stable. The use of distressed exchanges among leveraged loan borrowers and payment-in-kind interest among private credit borrowers, however, remained elevated. Delinquency rates on small business loans continued to be moderately above pre-pandemic levels, and those on CMBS remained elevated through September. Delinquency rates on most mortgage loan types, by contrast, stayed near historical lows. Credit card delinquency rates inched down in September, while auto loan delinquency rates ticked up, and both rates stood above their pre-pandemic levels. The staff provided an updated assessment of the stability of the U.S. financial system and, on balance, continued to characterize the system's financial vulnerabilities as notable. The staff judged that asset valuation pressures were elevated. For public equities, price-to-earnings ratios stood at the upper end of their historical distribution. Nonprice indicators, such as the number of newly launched leveraged exchanged-traded products, also reflected high and broad-based investor demand for risky assets. Vulnerabilities associated with nonfinancial business and household debt were characterized as moderate. Corporate debt grew modestly over the past few years, and household balance sheets remained strong. The rapid growth of private credit moderated somewhat, but recent bankruptcies raised concerns about credit quality and hidden leverage in this market. House prices remained high but flattened out in the past year, and the likelihood of severe distress among mortgage borrowers appeared to be notably lower than following the previous period of elevated house prices, in part because of stronger underwriting standards and near historical highs for homeowners' equity. Vulnerabilities associated with leverage in the financial sector were characterized as notable. Hedge fund leverage, on average, remained elevated and increased further, driven by both a shift toward more leveraged strategies and an increase in leverage within strategies. Available data suggested that hedge fund exposure to Treasury markets doubled over the past two years. By contrast, banks remained resilient, with high regulatory capital ratios and improved funding structure, although their market-adjusted capital ratios remained depressed and sensitive to long-term interest rates. Vulnerabilities associated with funding risks were characterized as moderate. The amount of total short-run funding instruments and cash management vehicles as a fraction of GDP grew in recent years but remained in the middle of its historical range. The total market capitalization of stablecoins, some of which may be vulnerable to runs, grew significantly in the past two years. Staff Economic Outlook Relative to the forecast prepared for the September meeting, real GDP growth was projected to be modestly stronger, on balance, through 2028, reflecting stronger expected potential output growth and greater projected support from financial conditions. GDP growth after 2025 was expected to remain above potential until 2028 as the drag from higher tariffs waned, with financial conditions becoming a tailwind for spending. As a result, the unemployment rate was expected to decline gradually after this year before flattening out at a level slightly below the staff's estimate of the natural rate of unemployment. The staff's inflation forecast was broadly similar to the one prepared for the September meeting, with tariff increases expected to put upward pressure on inflation in 2025 and 2026. Thereafter, inflation was projected to return to its previous disinflationary trend. The staff continued to view the uncertainty around the forecast as elevated, citing a cooling labor market, still-elevated inflation, heightened uncertainty about government policy changes and their effects on the economy, and the limited availability of data caused by the government shutdown. Risks around the employment and GDP forecasts continued to be seen as skewed to the downside, as elevated economic uncertainty and a cooling labor market raised the risk of a sharper-than-expected weakening in labor market conditions and output growth. Risks around the inflation forecast continued to be seen as skewed to the upside, as the elevated levels of some measures of expected inflation and more than four consecutive years of actual inflation above 2 percent raised the possibility that this year's projected rise in inflation would prove to be more persistent than the staff anticipated. Participants' Views on Current Conditions and the Economic Outlook In their discussion of inflation, participants observed that overall inflation had moved up since earlier in the year and remained somewhat above the Committee's 2 percent longer-run goal. Participants generally noted that core inflation had remained elevated, as disinflation in housing services had been more than offset by higher goods inflation, reflecting in part the effects of tariff increases implemented earlier in the year. Several participants observed that, setting aside their estimates of tariff effects, inflation was close to the Committee's target. Many participants, however, remarked that overall inflation had been above target for some time and had shown little sign of returning sustainably to the 2 percent objective in a timely manner. Participants generally expected inflation to remain somewhat elevated in the near term before moving gradually to 2 percent. Several participants pointed to the persistence in core nonhousing services inflation as a factor that may keep overall inflation above 2 percent in the near term. Many participants expected some additional pickup in core goods inflation over the next few quarters, driven in part by further pass-through of tariffs to firms' pricing. Several participants expressed uncertainty about the timing and magnitude of tariff-related price effects, noting that some businesses were reportedly waiting to adjust prices until tariff policies seemed more settled. Drawing on reports from their District contacts, several participants remarked that businesses, including those not directly affected by tariffs, indicated that they planned to raise prices gradually in response to higher tariff-related input costs. A few participants suggested that potential recent productivity gains achieved through automation and AI may help businesses support their profit margins and limit the extent to which cost increases are passed on to consumers. A few participants commented that the softer labor market would likely help keep inflationary pressures in check. A couple of participants noted that recent changes in immigration policies would lessen housing demand and strengthen the disinflation in housing services prices. Participants generally noted that most measures of short-term inflation expectations had eased somewhat from their peaks earlier in the year and that most survey-based and market-based measures of longer-term inflation have shown little net change since the end of last year, which suggested that longer-term inflation expectations remained well anchored. Participants emphasized the importance of maintaining well-anchored inflation expectations to help return inflation to the Committee's 2 percent objective in a timely manner, and many noted concerns that the prolonged period of above-target inflation could risk an increase in longer-term expectations. With regard to the labor market, participants observed that the data available before the government shutdown indicated that job gains had slowed this year and that the unemployment rate had edged up but remained low through August. Participants commented on the lack of the Employment Situation report for September during this intermeeting period and reported relying on private-sector and limited government data, as well as information provided by businesses and community contacts, to assess labor market conditions. Participants pointed to recent available indicators, including survey-based measures of job availability, as being consistent with layoffs and hiring having remained low as well as a labor market that had gradually softened through September and October but had not sharply deteriorated. Participants generally attributed the slowdown in job creation to both reduced labor supply—stemming from lower immigration and labor force participation—and less labor demand amid moderate economic growth and elevated uncertainty. Many participants remarked that structural factors such as investment related to AI and other productivity-enhancing technologies may be contributing to softer labor demand. Regarding the outlook for the labor market, participants generally expected conditions to soften gradually in coming months and the labor market to remain less dynamic than earlier in the year, with businesses reluctant to add workers but also hesitant to lay off employees. Several participants described the lack of job turnover and hesitancy among businesses to add jobs as adding downside risks to the labor market, noting that a further weakening in labor demand could push the unemployment rate sharply higher. A few participants viewed the rise in the unemployment rates for groups historically more sensitive to cyclical changes in economic activity, or the concentration of job gains in less-cyclical sectors, as signaling potential broader labor market weakness. Some participants noted the apparent divergence between subdued job growth and moderate GDP growth, with several suggesting that this pattern might persist over time as advances in AI boost productivity growth while demographic factors constrain labor supply. Participants noted that available indicators suggested that economic activity appeared to have been expanding at a moderate pace, although a number of participants observed that the lack of government-provided spending data since the shutdown made it challenging to gauge the more recent strength of overall activity. Participants generally noted that consumer spending had shown signs of firming in recent months after the slowdown observed early in the year. Many participants, however, remarked on a divergence in spending patterns across income groups, noting that consumption growth appeared to be disproportionately supported by higher-income households benefiting from strong equity markets, while lower-income households demonstrated increased price sensitivity and spending adjustments in response to high prices and elevated economic uncertainty. A couple of participants expressed concern about the relatively narrow base of support for consumption growth, noting the potential vulnerability should high-income consumer spending weaken. A couple of participants mentioned continued weakness in the housing market, despite some recent signs of stabilization, and that housing-affordability challenges remained a significant constraint on the sector. Regarding the business sector, many participants highlighted strong investment in technology, particularly spending related to AI and data centers. Some participants suggested that those investments could boost productivity and thus aggregate supply. A few participants noted that lower business taxes or further expected easing in government regulations would likely support business activity and productivity growth over time. Some participants remarked that financial conditions were supportive of economic activity. A few participants mentioned the persistent headwinds facing the agricultural sector from compressed profit margins due to low crop prices, elevated input costs, and retrenched demand from abroad. Participants generally judged that uncertainty about the economic outlook remained elevated. Participants saw risks to both sides of the Committee's dual mandate, with many indicating that downside risks to employment had increased since earlier in the year, as the unemployment rate ticked up and the pace of job gains slowed, leaving the labor market more susceptible to any negative shock. Many participants continued to see upside risks to their inflation outlook, pointing to the possibility that elevated inflation could prove more persistent than currently expected even after the effects of this year's tariff increases fade. A few participants remarked on the risk that trade tensions could disrupt global supply chains and weigh on overall economic activity. Many participants observed that the divergence between solid economic growth and weak job creation created a particularly challenging environment for policy decisions, requiring careful monitoring of incoming data to distinguish between cyclical weakness and structural changes in the relationship between output and employment. When discussing uncertainty, various participants expressed concern about the potential effect of a prolonged government shutdown, both on near-term economic activity and on the ability to accurately assess economic conditions because of limitations to the availability of federal government data. Several participants, however, remarked that other private and public indicators, as well as information in the Beige Book and obtained from District contacts, continued to provide useful signals about economic conditions. In their discussion of financial stability, a number of participants pointed to some recent failures of firms involved in nonbank credit activity. These participants suggested that there were various reasons for concern about developments in the private credit sector, which included risks related to loan quality, the sector's funding practices, poor underwriting and collateral practices, banks' exposure to the sector, and the possibility of the transmission of strains in the sector to the real economy. A few participants noted that recent years' growth in private credit was an example of traditional financial activity moving outside the existing U.S. regulatory framework. Some participants commented on stretched asset valuations in financial markets, with several of these participants highlighting the possibility of a disorderly fall in equity prices, especially in the event of an abrupt reassessment of the possibilities of AI-related technology. A couple of participants cited risks associated with high levels of corporate borrowing. In their consideration of monetary policy at this meeting, participants noted that inflation had moved up since earlier in the year and remained somewhat elevated. Participants further noted that available indicators suggested that economic activity had been expanding at a moderate pace. They observed that job gains had slowed this year and that the unemployment rate had edged up but remained low through August. Participants assessed that more recent indicators were consistent with these developments. In addition, they judged that downside risks to employment had risen in recent months. Against this backdrop, many participants were in favor of lowering the target range for the federal funds rate at this meeting, some supported such a decision but could have also supported maintaining the level of the target range, and several were against lowering the target range. Those who favored or could have supported a lowering of the target range for the federal funds rate toward a more neutral setting generally observed that such a decision was appropriate because downside risks to employment had increased in recent months and upside risks to inflation had diminished since earlier this year or were little changed. Those who preferred to keep the target range for the federal funds rate unchanged at this meeting expressed concern that progress toward the Committee's inflation objective had stalled this year, as inflation readings increased, or that more confidence was needed that inflation was on a course toward the Committee's 2 percent objective, while also noting that longer-term inflation expectations could rise should inflation not return to 2 percent in a timely manner. One participant agreed with the need to move toward a more neutral monetary policy stance but preferred a 1/2 percentage point reduction at this meeting. In light of their assessment that reserve balances had reached or were approaching ample levels, almost all participants noted that it was appropriate to conclude the reduction in the Committee's aggregate securities holdings on December 1 or that they could support such a decision. In considering the outlook for monetary policy, participants expressed a range of views about the degree to which the current stance of monetary policy was restrictive. Some participants assessed that the Committee's policy stance would be restrictive even after a potential 1/4 percentage point reduction in the policy rate at this meeting. By contrast, some participants pointed to the resilience of economic activity, supportive financial conditions, or estimates of short-term real interest rates as indicating that the stance of monetary policy was not clearly restrictive. In discussing the near-term course of monetary policy, participants expressed strongly differing views about what policy decision would most likely be appropriate at the Committee's December meeting. Most participants judged that further downward adjustments to the target range for the federal funds rate would likely be appropriate as the Committee moved to a more neutral policy stance over time, although several of these participants indicated that they did not necessarily view another 25 basis point reduction as likely to be appropriate at the December meeting. Several participants assessed that a further lowering of the target range for the federal funds rate could well be appropriate in December if the economy evolved about as they expected over the coming intermeeting period. Many participants suggested that, under their economic outlooks, it would likely be appropriate to keep the target range unchanged for the rest of the year. All participants agreed that monetary policy was not on a preset course and would be informed by a wide range of incoming data, the evolving economic outlook, and the balance of risks. In discussing risk-management considerations that could bear on the outlook for monetary policy, participants generally judged that upside risks to inflation remained elevated and that downside risks to employment were elevated and had increased since the first half of the year. Many participants agreed that the Committee should be deliberate in its policy decisions against the backdrop of these two-sided risks and reduced availability of key economic data. Most participants suggested that, in moving to a more neutral policy stance, the Committee was helping forestall the possibility of a major deterioration in labor market conditions. Many of these participants also judged that, with more evidence having accumulated that the effect on overall inflation of this year's higher tariffs would likely be limited, it was appropriate for the Committee to ease its policy stance in response to downside risks to employment. Most participants noted that, against a backdrop of elevated inflation readings and a very gradual cooling of labor market conditions, further policy rate reductions could add to the risk of higher inflation becoming entrenched or could be misinterpreted as implying a lack of policymaker commitment to the 2 percent inflation objective. Participants judged that a careful balancing of risks was required and agreed on the importance of well-anchored longer-term inflation expectations in achieving the Committee's dual-mandate objectives. Committee Policy Actions In their discussions of monetary policy for this meeting, members agreed that available indicators suggested that economic activity had been expanding at a moderate pace. They also agreed that job gains had slowed this year and that the unemployment rate had edged up but remained low through August. Members observed that more recent indicators were consistent with these developments. They noted that inflation had moved up since earlier in the year and remained somewhat elevated. They agreed that the Committee was attentive to the risks to both sides of its dual mandate and that downside risks to employment had risen in recent months. In support of the Committee's goals and in light of the shift in the balance of risks, almost all members decided to lower the target range for the federal funds rate by 1/4 percentage point to 3-3/4 to 4 percent. Two members voted against that decision. One of these members preferred to lower the target range 1/2 percentage point, while the other member preferred to leave the target range unchanged. Almost all members agreed to conclude the reduction of the Committee's securities holdings on December 1. One member who voted against the Committee's policy rate decision at the meeting also preferred an immediate end to balance sheet runoff. Members agreed that, in considering additional adjustments to the target range for the federal funds rate, the Committee would carefully assess incoming data, the evolving outlook, and the balance of risks. All members agreed that the postmeeting statement should affirm their strong commitment both to supporting maximum employment and to returning inflation to the Committee's 2 percent objective. Members agreed that, in assessing the appropriate stance of monetary policy, the Committee would continue to monitor the implications of incoming information for the economic outlook. They would be prepared to adjust the stance of monetary policy if risks emerged that could impede the attainment of the Committee's goals. Members also agreed that their assessments would take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments. At the conclusion of the discussion, the Committee voted to direct the Federal Reserve Bank of New York, until instructed otherwise, to execute transactions in the SOMA in accordance with the following domestic policy directive, for release at 2:00 p.m.: "Effective October 30, 2025, the Federal Open Market Committee directs the Desk to: Undertake open market operations as necessary to maintain the federal funds rate in a target range of 3-3/4 to 4 percent. Conduct standing overnight repurchase agreement operations with a minimum bid rate of 4.0 percent and with an aggregate operation limit of $500 billion. Conduct standing overnight reverse repurchase agreement operations at an offering rate of 3.75 percent and with a per-counterparty limit of $160 billion per day. Roll over at auction the amount of principal payments from the Federal Reserve's holdings of Treasury securities maturing in October and November that exceeds a cap of $5 billion per month. Redeem Treasury coupon securities up to this monthly cap and Treasury bills to the extent that coupon principal payments are less than the monthly cap. Beginning on December 1, roll over at auction all principal payments from the Federal Reserve's holdings of Treasury securities. Reinvest the amount of principal payments from the Federal Reserve's holdings of agency debt and agency mortgage-backed securities (MBS) received in October and November that exceeds a cap of $35 billion per month into Treasury securities to roughly match the maturity composition of Treasury securities outstanding. Beginning on December 1, reinvest all principal payments from the Federal Reserve's holdings of agency securities into Treasury bills. Allow modest deviations from stated amounts for reinvestments, if needed for operational reasons." The vote also encompassed approval of the statement below for release at 2:00 p.m.: "Available indicators suggest that economic activity has been expanding at a moderate pace. Job gains have slowed this year, and the unemployment rate has edged up but remained low through August; more recent indicators are consistent with these developments. Inflation has moved up since earlier in the year and remains somewhat elevated. The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty about the economic outlook remains elevated. The Committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment rose in recent months. In support of its goals and in light of the shift in the balance of risks, the Committee decided to lower the target range for the federal funds rate by 1/4 percentage point to 3-3/4 to 4 percent. In considering additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee decided to conclude the reduction of its aggregate securities holdings on December 1. The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective. In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals. The Committee's assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments." Voting for this action: Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michael S. Barr; Michelle W. Bowman; Susan M. Collins; Lisa D. Cook; Austan D. Goolsbee; Philip N. Jefferson; Alberto G. Musalem; and Christopher J. Waller. Voting against this action: Stephen I. Miran, who preferred to lower the target range for the federal funds rate by 1/2 percentage point at this meeting, and Jeffrey R. Schmid, who preferred no change to the target range for the federal funds rate at this meeting. Consistent with the Committee's decision to lower the target range for the federal funds rate to 3-3/4 to 4 percent, the Board of Governors of the Federal Reserve System voted unanimously to lower the interest rate paid on reserve balances to 3.90 percent, effective October 30, 2025. The Board of Governors of the Federal Reserve System voted unanimously to approve a 1/4 percentage point decrease in the primary credit rate to 4.0 percent, effective October 30, 2025. 3 It was agreed that the next meeting of the Committee would be held on Tuesday–Wednesday, December 9–10, 2025. The meeting adjourned at 10:20 a.m. on October 29, 2025. Notation Vote By notation vote completed on October 7, 2025, the Committee unanimously approved the minutes of the Committee meeting held on September 16–17, 2025. Attendance Jerome H. Powell, Chair John C. Williams, Vice Chair Michael S. Barr Michelle W. Bowman Susan M. Collins Lisa D. Cook Austan D. Goolsbee Philip N. Jefferson Stephen I. Miran Alberto G. Musalem Jeffrey R. Schmid Christopher J. Waller Beth M. Hammack, Neel Kashkari, Lorie K. Logan, Anna Paulson, and Sushmita Shukla, Alternate Members of the Committee Thomas I. Barkin, Raphael W. Bostic, and Mary C. Daly, Presidents of the Federal Reserve Banks of Richmond, Atlanta, and San Francisco, respectively Joshua Gallin, Secretary Matthew M. Luecke, Deputy Secretary Brian J. Bonis, Assistant Secretary Michelle A. Smith, Assistant Secretary Mark E. Van Der Weide, General Counsel Richard Ostrander, Deputy General Counsel Trevor A. Reeve, Economist Stacey Tevlin, Economist Beth Anne Wilson, Economist Brian M. Doyle, Carlos Garriga, Joseph W. Gruber, and William Wascher, Associate Economists Roberto Perli, Manager, System Open Market Account Julie Ann Remache, Deputy Manager, System Open Market Account Daniel Aaronson, Interim Director of Research, Federal Reserve Bank of Chicago Stephanie R. Aaronson, Senior Associate Director, Division of Research and Statistics, Board Jose Acosta, Senior System Engineer II, Division of Information Technology, Board Roc Armenter, Executive Vice President, Federal Reserve Bank of Philadelphia Alyssa Arute, 4 Assistant Director, Division of Reserve Bank Operations and Payment Systems, Board Alessandro Barbarino, Special Adviser to the Board, Division of Board Members, Board Julia Barmeier, 4 Lead Financial Institution Policy Analyst, Division of Reserve Bank Operations and Payment Systems, Board William F. Bassett, Senior Associate Director, Division of Financial Stability, Board Jose Berrospide, Assistant Director, Division of Financial Stability, Board Paola Boel, Vice President, Federal Reserve Bank of Cleveland Erik Bostrom, 4 Senior Financial Institution Policy Analyst I, Division of Monetary Affairs, Board David Bowman, 4 Senior Associate Director, Division of Monetary Affairs, Board Nina Boyarchenko, Financial Research Advisor, Federal Reserve Bank of New York Falk Braeuning, Vice President, Federal Reserve Bank of Boston Christian V. Cabanilla, 4 Policy Advisor, Federal Reserve Bank of New York Michele Cavallo, Special Adviser to the Board, Division of Board Members, Board Kathryn B. Chen, 4 Director of Cross Portfolio Policy and Analysis, Federal Reserve Bank of New York Andrew Cohen, 5 Special Adviser to the Board, Division of Board Members, Board Stephanie E. Curcuru, Deputy Director, Division of International Finance, Board Marnie Gillis DeBoer, 6 Senior Associate Director, Division of Monetary Affairs, Board Anthony M. Diercks, Principal Economist, Division of Monetary Affairs, Board Cynthia L. Doniger, 4 Principal Economist, Division of Monetary Affairs, Board Burcu Duygan-Bump, Associate Director, Division of Research and Statistics, Board Giovanni Favara, Deputy Associate Director, Division of Monetary Affairs, Board Laura J. Feiveson, 7 Special Adviser to the Board, Division of Board Members, Board Erin E. Ferris, 4 Principal Economist, Division of Monetary Affairs, Board Andrew Figura, Associate Director, Division of Research and Statistics, Board Aaron Flaaen, Principal Economist, Division of International Finance, Board Glenn Follette, Associate Director, Division of Research and Statistics, Board Greg Frischmann, Senior Special Counsel, Legal Division, Board; Special Adviser to the Board, Division of Board Members, Board Jamie Grasing, 4 Senior Data Engineer, Division of Monetary Affairs, Board Brian Greene, 4 Associate Director, Federal Reserve Bank of New York James Hebden, Principal Economic Modeler, Division of Monetary Affairs, Board Valerie S. Hinojosa, Section Chief, Division of Monetary Affairs, Board Matteo Iacoviello, Senior Associate Director, Division of International Finance, Board Jane E. Ihrig, Special Adviser to the Board, Division of Board Members, Board Sebastian Infante, 4 Section Chief, Division of Monetary Affairs, Board Benjamin K. Johannsen, Assistant Director, Division of Monetary Affairs, Board Callum Jones, Principal Economist, Division of Monetary Affairs, Board Michael T. Kiley, Deputy Director, Division of Monetary Affairs, Board Elizabeth Klee, Deputy Director, Division of Monetary Affairs, Board Michael Koslow, 4 Associate Director, Federal Reserve Bank of New York Anna R. Kovner, Executive Vice President, Federal Reserve Bank of Richmond Seung Kwak, Senior Economist, Division of Monetary Affairs, Board Britt Leckman, 8 Federal Reserve Board Staff Photographer, Division of Board Members, Board Andreas Lehnert, Director, Division of Financial Stability, Board Eric B. Lewin, 4 Assistant General Counsel, Federal Reserve Bank of New York Kurt F. Lewis, Special Adviser to the Chair, Division of Board Members, Board Laura Lipscomb, Special Adviser to the Board, Division of Board Members, Board Byron Lutz, Deputy Associate Director, Division of Research and Statistics, Board Dina Tavares Marchioni, 9 Director of Money Markets, Federal Reserve Bank of New York Benjamin W. McDonough, Deputy Secretary and Ombudsman, Office of the Secretary, Board Alisdair G. McKay, Monetary Advisor, Federal Reserve Bank of Minneapolis Kindra I. Morelock, Information Services Senior Analyst, Division of Monetary Affairs, Board, and Federal Reserve Bank of Chicago Norman J. Morin, Associate Director, Division of Research and Statistics, Board David Na, 4 Acting Group Manager, Division of Monetary Affairs, Board Edward Nelson, Senior Adviser, Division of Monetary Affairs, Board Anna Nordstrom, Head of Markets, Federal Reserve Bank of New York Caterina Petrucco-Littleton, 10 Deputy Associate Director, Division of Consumer and Community Affairs, Board; Special Adviser to the Board, Division of Board Members, Board Brian Phillips, 5 Special Adviser to the Board, Division of Board Members, Board Eugenio P. Pinto, 7 Special Adviser to the Board, Division of Board Members, Board Christine Repper, 11 Manager, Division of Reserve Bank Operations and Payment Systems, Board William E. Riordan, 4 Capital Markets Trading Advisor, Federal Reserve Bank of New York Samuel Schulhofer-Wohl, Senior Vice President, Federal Reserve Bank of Dallas Kirk Schwarzbach, Special Assistant to the Board, Division of Board Members, Board Zeynep Senyuz, Special Adviser to the Board, Division of Board Members, Board John J. Stevens, Senior Associate Director, Division of Research and Statistics, Board Mary H. Tian, 4 Group Manager, Division of Monetary Affairs, Board Paula Tkac, Director of Research, Federal Reserve Bank of Atlanta Annette Vissing-Jørgensen, Senior Adviser, Division of Monetary Affairs, Board Jeffrey D. Walker, 4 Senior Associate Director, Division of Reserve Bank Operations and Payment Systems, Board Eric Wallerstein, Special Adviser to the Board, Division of Board Members, Board Daniel Wilson, Vice President, Federal Reserve Bank of San Francisco Evan Winerman, 4 Deputy Associate General Counsel, Legal Division, Board Emre Yoldas, Deputy Associate Director, Division of International Finance, Board Filip Zikes, Special Adviser to the Board, Division of Board Members, Board _______________________ Joshua Gallin Secretary 1. The Federal Open Market Committee is referenced as the "FOMC" and the "Committee" in these minutes; the Board of Governors of the Federal Reserve System is referenced as the "Board" in these minutes. Return to text 2. The discussion summarized here draws from remarks made by participants during various portions of the meeting, as the agenda did not include a separate policymaker discussion about the SRF. Return to text 3. In taking this action, the Board approved requests to establish that rate submitted by the Board of Directors of the Federal Reserve Banks of Boston, New York, Philadelphia, Richmond, Atlanta, Chicago, Dallas, and San Francisco. The vote also encompassed approval by the Board of Governors of the establishment of a 4.0 percent primary credit rate by the remaining Federal Reserve Banks, effective on October 30, 2025, or the date such Reserve Banks inform the Secretary of the Board of such a request. (Secretary's note: Subsequently, the Federal Reserve Banks of Cleveland, St. Louis, Minneapolis, and Kansas City were informed of the Board's approval of their establishment of a primary credit rate of 4.0 percent, effective October 30, 2025.) Return to text 4. Attended through the discussion of balance sheet issues. Return to text 5. Attended the discussion of economic developments and the outlook. Return to text 6. Attended through the discussion of developments in financial markets and open market operations. Return to text 7. Attended through the discussion of balance sheet issues, and from the discussion of current monetary policy through the end of the meeting. Return to text 8. Attended opening remarks for Tuesday's session only. Return to text 9. Attended through the discussion of economic developments and the outlook. Return to text 10. Attended Wednesday's session only. Return to text 11. Attended Tuesday's session only. Return to text

Minutes of the Federal Open Market Committee September 16–17, 2025 A joint meeting of the Federal Open Market Committee and the Board of Governors of the Federal Reserve System was held in the offices of the Board of Governors on Tuesday, September 16, 2025, at 10:30 a.m. and continued on Wednesday, September 17, 2025, at 9:00 a.m. 1 Developments in Financial Markets and Open Market Operations The deputy manager turned first to an overview of financial market developments during the intermeeting period. Markets appeared to interpret data releases and FOMC communications as indicating that the baseline outlook was little changed but that downside risks to the labor market had increased. Median modal expectations for personal consumption expenditures (PCE) inflation this year and next from the Open Market Desk's Survey of Market Expectations (Desk survey) increased only slightly, and expectations for the unemployment rate increased only marginally overall. However, after the weaker-than-expected July and August employment reports, investors' focus shifted to downside risks to the labor market. Near-term expectations for the policy rate had moved lower in response to weaker-than-expected employment data and the apparent rise in downside employment risks. Almost all respondents to the Desk survey expected a 25 basis point cut in the target range for the federal funds rate at this meeting, and around half expected an additional cut at the October meeting. The vast majority of survey respondents expected at least two 25 basis point cuts by year-end, with around half expecting three cuts over that time. Respondents' expectations for 2027 and beyond were unchanged, implying that revisions to respondents' near-term expectations reflected an anticipation of a faster return of the federal funds rate to its longer-run level than previously expected. Market-based measures of policy rate expectations were broadly consistent with responses to the Desk survey, reflecting about three 25 basis point cuts by the end of the year. The deputy manager then discussed developments in Treasury markets and market-based measures of inflation compensation. Nominal Treasury yields fell 20 to 40 basis points over the intermeeting period, with the largest decline occurring at the short end of the yield curve; the curve therefore steepened. Staff models indicated that nearly all the decline in short-term rates was attributable to the shift down in policy rate expectations. Market-based measures of inflation compensation fell slightly over the intermeeting period. Equity prices continued to rise over the intermeeting period and stood very close to record highs despite the recent weaker-than-expected employment reports. The deputy manager noted this development was consistent with the benign baseline macroeconomic outlook incorporated in most private-sector forecasts and strong realized earnings in technology and other sectors. Corporate bond spreads were little changed over the intermeeting period and remained at tight levels, signaling that investors anticipated relatively moderate credit losses. Regarding foreign exchange developments, the deputy manager noted that the broad trade-weighted dollar index had generally stabilized and that the dollar returned to trading roughly in line with fundamental macroeconomic drivers over the intermeeting period. The available data continued to suggest foreign demand for U.S. assets remained resilient. The deputy manager turned next to money markets. The effective federal funds rate remained stable, and repurchase agreement (repo) rates moved higher over the intermeeting period. The increase in repo rates over the period was driven by the increase in net Treasury bill issuance amid the rebuilding of the Treasury General Account (TGA) following the debt ceiling resolution, continued large Treasury coupon issuance, and ongoing reductions in the Federal Reserve's balance sheet. Reserves fell sharply on September 15 in response to an increase in the TGA, driven by tax receipts and significant net issuance of Treasury coupon securities. Repo rates came under additional upward pressure that day, and take-up at the standing repo facility (SRF) reached $1.5 billion. There were some signs of slight upward pressure on rates in the federal funds market but not enough to move the effective federal funds rate. While key indicators remained consistent with abundant reserves, money market rates were expected to continue to increase over time relative to administered rates and to eventually pull the effective federal funds rate higher. The deputy manager concluded by discussing the trajectory of the balance sheet. If balance sheet runoff were to continue at the current pace, the System Open Market Account (SOMA) portfolio was expected to decline to just over $6 trillion by the end of March, with Federal Reserve notes growing at a gradual pace, the TGA fluctuating around current levels, and usage of the overnight reverse repurchase agreement (ON RRP) facility remaining very low except on quarter-end dates. As a result, the deputy manager expected reserves to be close to the $2.8 trillion range by the end of the first quarter of next year if runoff were to continue at the current pace. All but one member of the Committee voted to ratify the Desk's domestic transactions over the intermeeting period. Governor Stephen Miran, who had been sworn in as a member of the Board that morning, abstained from voting. There were no intervention operations in foreign currencies for the System's account during the intermeeting period. Staff Review of the Economic Situation The information available at the time of the meeting indicated that real gross domestic product (GDP) growth had moderated in the first half of the year. Although the unemployment rate continued to be low, the pace of employment increases had slowed, and labor market conditions had softened. Consumer price inflation remained somewhat elevated. Total consumer price inflation—as measured by the 12-month change in the PCE price index—was estimated to have been 2.7 percent in August, based on the data from the consumer and producer price indexes. Core PCE price inflation, which excludes changes in consumer energy prices and many consumer food prices, was estimated to have been 2.9 percent in August. Both inflation rates were at the upper end of their ranges since the beginning of the year. Recent data indicated that labor market conditions had softened. The unemployment rate edged up to 4.3 percent in August, a little higher than it had been at the beginning of the year. The participation rate was somewhat lower in August than it was at the beginning of the year. Average monthly increases in total nonfarm payrolls over July and August were weak, and job gains were revised down notably in May and June. The Bureau of Labor Statistics' (BLS) preliminary estimate of the benchmark revision for April 2024 through March 2025 indicated that the level of payrolls for March was more than 900,000 lower than had been reported. The ratio of job vacancies to unemployed workers was 1.0 in August and remained within the narrow range seen over the past year. The employment cost index of hourly compensation for private-sector workers increased 3.5 percent over the 12 months ending in June, and average hourly earnings for all employees rose 3.7 percent over the 12 months ending in August. Both wage growth measures were lower than their year-earlier levels. Real GDP rose in the second quarter after declining in the first quarter, but GDP growth over the first half as a whole was slower than last year. Growth of real private domestic final purchases (PDFP)—which comprises PCE and private fixed investment and which often provides a better signal than GDP of underlying economic momentum—had also moderated in the first half relative to last year. Recent indicators for consumer spending and business investment spending—particularly for high-tech equipment and software—pointed to further moderate gains in PDFP in the third quarter, but housing-sector activity remained weak. After falling sharply in the second quarter, real imports of goods increased in July, particularly for capital goods. By contrast, exports edged down in July, following modest increases over the first half of the year. Foreign GDP growth slowed markedly in the second quarter, as the transitory boost due to the front-loading of U.S. imports earlier in the year faded. Canadian economic activity contracted significantly, as exports of price-sensitive industrial supplies fell sharply in the face of higher U.S. tariffs. Economic growth in Mexico and parts of Asia was supported by strong demand for high-tech products. Headline inflation was near central banks' targets in most foreign economies, aided by past declines in energy prices. However, core inflation remained persistently elevated in some economies, such as Brazil, Mexico, and the U.K. By contrast, inflation in China continued to be subdued. Several foreign central banks—including the European Central Bank—held their policy rates steady, while others—such as the Reserve Bank of New Zealand and the Reserve Bank of Australia—resumed reducing their policy rates, as disinflation continued. Staff Review of the Financial Situation The market-implied path of the federal funds rate decreased notably over the intermeeting period. Options on interest rate futures suggested that market participants were placing a higher probability on greater policy easing by early 2026 than they had just before the July FOMC meeting. Consistent with the downward shift in the implied policy rate path, nominal Treasury yields declined notably, on net, particularly at shorter horizons. Changes in nominal yields were driven primarily by reductions in real Treasury yields as inflation compensation fell to a lesser degree, on net, across maturities. Broad equity price indexes increased amid strong corporate earnings reports and expectations of lower policy rates, while credit spreads were little changed and remained very low by historical standards. The one-month option-implied volatility on the S&P 500 index—the VIX—ended the period essentially unchanged, on net, at a moderate level. Risk sentiment generally improved in global financial markets, supported by trade policy developments that were perceived as reducing negative tail risks to economic growth, strong corporate earnings, and lower interest rates in the U.S. On balance, foreign equity indexes rose moderately, credit spreads narrowed slightly, and the exchange value of the dollar declined modestly. Increased political uncertainty led to volatility of longer-term government bond yields in some advanced foreign economies. Conditions in U.S. short-term funding markets remained orderly over the intermeeting period, and the FOMC's target policy rate continued to transmit to private rates in the usual manner. Following the increase in the federal debt limit in early July, TGA balances continued to increase, while usage of the ON RRP facility declined notably to its lowest levels since April 2021. Amid increases in the TGA, there were mild upward pressures in secured market rates over the July and August month-ends. Secured rates remained elevated in the lead-up to the mid-September tax and coupon issuance date. On September 15, the Secured Overnight Financing Rate temporarily printed above the minimum bid rate at the SRF amid $1.5 billion in take-up at the facility. Amid these movements in secured rates, the effective federal funds rate remained unchanged relative to the interest rate on reserve balances. In domestic credit markets, borrowing costs generally declined but remained elevated relative to their average post–Global Financial Crisis (GFC) levels. Yields on corporate bonds decreased moderately, while yields on leveraged loans were little changed on net. Interest rates on commercial and industrial (C&I) and short-term business loans remained elevated relative to their post-GFC averages. Rates on 30-year fixed-rate conforming residential mortgages declined moderately, on net, and remained elevated. Yields on higher-rated tranches of commercial mortgage-backed securities (CMBS) moved down modestly, and those on lower-rated tranches of non-agency CMBS declined notably. Interest rates on existing credit card accounts continued to tick up through June, while offer rates on new credit cards were little changed. Financing from capital markets remained broadly available for medium-sized and large businesses. Gross issuance of nonfinancial corporate bonds across credit categories continued at a strong pace in July and August, and issuance of leveraged loans was robust in recent months. Lending in private credit markets continued at a solid pace in July. After relatively strong growth in the second quarter, C&I loan balances on banks' books also continued to grow at a solid pace in July and August. Commercial real estate (CRE) loans continued to grow at a modest pace in July and August. Credit remained available for most businesses, households, and municipalities, while credit continued to be relatively tight for small businesses and households with lower credit scores. In the residential mortgage market, credit remained easily available for high-credit-score borrowers who met standard conforming loan criteria but generally tight for low-credit-score borrowers. While consumer credit remained generally available for most households, the growth of revolving credit and auto loans was relatively weak in the second quarter. Credit quality was generally stable at levels somewhat weaker than during the pre-pandemic period. The credit performance of corporate bonds and leveraged loans remained generally stable, though the default rate for leveraged loans that includes distressed exchanges continued to be elevated. Delinquency rates on small business loans in June and July ticked up and were moderately above pre-pandemic levels. In the CRE market, CMBS delinquency rates remained elevated through August. Regarding household credit quality, the delinquency rates on Federal Housing Administration mortgages remained at the upper end of their range over the past few years. By contrast, delinquency rates on most other mortgage loan types stayed near historical lows. In the second quarter, credit card and auto loan delinquency rates remained at elevated levels but were little changed. Staff Economic Outlook Compared with the staff forecast prepared for the July meeting, the projection of real GDP growth was revised up somewhat, on balance, for this year through 2028, primarily reflecting stronger-than-expected data for both consumer spending and business investment as well as financial conditions that were projected to be a little more supportive of output growth. GDP growth was still projected to be faster next year than this year, as the effects of tariff increases and slower net immigration were expected to diminish. The staff continued to expect that the labor market would soften further this year, though the projected path for the unemployment rate in following years was a little lower than in the previous staff forecast. The unemployment rate was projected to move slightly above the staff's estimate of its natural rate through the remainder of this year and then to decline later in the projection as GDP growth picked up. The staff's inflation projection was only slightly revised from the one prepared for the July meeting. Tariff increases were still expected to raise inflation this year and to provide some further upward pressure on inflation in 2026. Inflation was projected to decline in 2026, to reach 2 percent in 2027, and to remain there in 2028. The staff continued to view the uncertainty around the projection as elevated, primarily reflecting uncertainty regarding changes to economic policies, including those for trade, immigration, fiscal spending, and regulation, and their associated economic effects. Risks to employment and the labor market were judged to have become a little more tilted to the downside, stemming from the recent softening in labor market conditions amid modest real GDP growth. The staff continued to view the risks around the inflation forecast as skewed to the upside, as the projected rise in inflation this year could prove to be more persistent than assumed in the baseline projection. Participants' Views on Current Conditions and the Economic Outlook In conjunction with this FOMC meeting, participants submitted their projections of the most likely outcomes for real GDP growth, the unemployment rate, and inflation for each year from 2025 through 2028 and over the longer run. The projections were based on participants' individual assessments of appropriate monetary policy, including their projections of the federal funds rate. Participants also provided their individual assessments of the level of uncertainty and the balance of risks associated with their projections. The Summary of Economic Projections was released to the public after the meeting. Participants observed that inflation had moved up since the beginning of the year and remained somewhat above the Committee's 2 percent longer-run goal. Although participants generally assessed that this year's tariff increases had put upward pressure on inflation, some remarked that these effects appeared to have been somewhat muted to date relative to expectations from earlier in the year. A few participants suggested that productivity gains may be reducing inflation pressures. A couple of participants expressed the view that, excluding the effects of this year's tariff increases, inflation would be close to target. A few other participants, however, emphasized that progress of inflation toward the Committee's 2 percent objective had stalled, even excluding the effects of this year's tariff increases. With regard to the outlook for inflation, participants generally expected that, given appropriate monetary policy, inflation would be somewhat elevated in the near term and would gradually return to 2 percent thereafter. Some participants noted that business contacts had indicated that they would raise prices over time because of higher input costs stemming from tariff increases. Uncertainty remained about the inflation effects of this year's increase in tariffs, though most participants expected these effects to be realized by the end of next year. Some participants remarked that the labor market was not expected to be a source of inflationary pressure. A couple of participants expected that the reduction in net migration would be associated with lower demand and lower inflation, and a couple of participants observed that continued productivity gains would likely reduce inflation pressures. Participants noted that longer-term inflation expectations continued to be well anchored and that it was important they remain so to help return inflation to 2 percent. Various participants stressed the central role of monetary policy in ensuring that longer-term inflation expectations remained well anchored. A majority of participants emphasized upside risks to their outlooks for inflation, pointing to inflation readings moving further from 2 percent, continued uncertainty about the effects of tariffs, the possibility that elevated inflation proves to be more persistent than currently expected even after the inflation effects of this year's tariff increases fade, or the possibility of longer-term inflation expectations moving up after a long period of elevated inflation readings. Some participants remarked that they perceived less upside risk to their outlooks for inflation than earlier in the year. In their discussion of the labor market, participants observed that job gains had slowed and the unemployment rate had edged up. Participants noted that the low level of estimated job gains over recent months likely reflected declines in growth of both labor supply and labor demand. Participants noted low net immigration or changes in labor force participation as factors reducing labor supply. As for factors that may be reducing labor demand, participants noted moderate economic growth or the effects of high uncertainty on firms' hiring decisions. Under these circumstances, participants cited a number of other indicators as helpful for assessing labor market conditions. These included the unemployment rate, the ratio of job vacancies to unemployed workers, wage growth, the percentage of unemployed workers who find a job, the quits rate among employed workers, and the layoff rate. Participants generally assessed that recent readings of these indicators did not show a sharp deterioration in labor market conditions. A few participants, though, saw recently released labor market data, including revisions to previously released data and the BLS's preliminary estimate of the payroll employment benchmark revision, as indicating that labor market conditions had been softening for longer than was previously reported. With regard to the outlook for the labor market, participants generally expected that, under appropriate monetary policy, labor market conditions would be little changed or would soften modestly. Several participants noted that the number of monthly job gains consistent with a stable unemployment rate had declined over the past year and would likely remain low, citing the large number of workers nearing retirement age or continued low net immigration. Participants indicated that their outlooks for the labor market were uncertain and viewed downside risks to employment as having increased over the intermeeting period. In support of this view, participants mentioned a number of indicators, including the following: low hiring and firing rates, which are evidence of less dynamism in the labor market; concentrated job gains in a small number of sectors; and increases in unemployment rates for groups that have historically shown greater sensitivity to cyclical changes in economic activity, such as those for African Americans and young people. Several participants saw continuing adoption of artificial intelligence as potentially reducing labor demand. Some participants noted that survey responses indicated that household sentiment regarding the labor market had moved down. Participants observed that growth of economic activity slowed in the first half of the year relative to last year. Regarding the household sector, participants noted that lower consumption growth had contributed to the slowdown in the growth of economic activity in the first half of the year. Several participants remarked that recent data indicated some firming of consumption expenditures this quarter. Some participants mentioned that households were showing greater price sensitivity, and several participants observed that high-income households were increasingly doing better, economically, than lower-income households. Several participants noted continued weakness in the housing market, and a couple of participants mentioned the possibility of a more substantial deterioration in the housing market as a downside risk to economic activity. For businesses, many participants noted strong high-tech investment. Several participants noted that financial conditions were supportive of economic activity. A few participants commented that the agricultural sector continued to face headwinds because of low crop prices and high input costs. In their consideration of monetary policy at this meeting, participants noted that inflation had risen recently and remained somewhat elevated, and that recent indicators suggested that growth of economic activity had moderated in the first half of the year. While participants noted the unemployment rate remained low, they observed that it had edged up and job gains had slowed. In addition, they judged that downside risks to employment had risen. Against this backdrop, almost all participants supported reducing the target range for the federal funds rate 1/4 percentage point at this meeting. Participants generally noted that their judgments about this meeting's appropriate policy action reflected a shift in the balance of risks. In particular, most participants observed that it was appropriate to move the target range for the federal funds rate toward a more neutral setting because they judged that downside risks to employment had increased over the intermeeting period and that upside risks to inflation had either diminished or not increased. A few participants stated there was merit in keeping the federal funds rate unchanged at this meeting or that they could have supported such a decision. These participants noted that progress toward the Committee's 2 percent inflation objective had stalled this year as inflation readings increased and expressed concern that longer-term inflation expectations may rise if inflation does not return to its objective in a timely manner. One participant agreed with the need to move policy toward a more neutral stance but preferred a 1/2 percentage point reduction at this meeting. All participants judged it appropriate to continue the process of reducing the Federal Reserve's securities holdings. In considering the outlook for monetary policy, almost all participants noted that, with the reduction in the target range for the federal funds rate at this meeting, the Committee was well positioned to respond in a timely way to potential economic developments. Participants observed that monetary policy was not on a preset course and would be informed by a wide range of incoming data, the evolving economic outlook, and the balance of risks. Participants expressed a range of views about the degree to which the current stance of monetary policy was restrictive and about the likely future path of policy. Most judged that it likely would be appropriate to ease policy further over the remainder of this year. Some participants noted that, by several measures, financial conditions suggested that monetary policy may not be particularly restrictive, which they judged as warranting a cautious approach in the consideration of future policy changes. In discussing risk-management considerations that could bear on the outlook for monetary policy, participants generally judged that upside risks to inflation remained elevated and that downside risks to employment were elevated and had increased. Participants noted that, in these circumstances, if policy were eased too much or too soon and inflation continued to be elevated, then longer-term inflation expectations could become unanchored and make restoring price stability even more challenging. By contrast, if policy rates were kept too high for too long, then unemployment could rise unnecessarily, and the economy could slow sharply. Against this backdrop, participants stressed the importance of taking a balanced approach in promoting the Committee's employment and inflation goals, taking into account the extent of departures from those goals and the potentially different time horizons over which employment and inflation are projected to return to levels judged consistent with the Committee's mandate. Several participants remarked on issues related to the Federal Reserve's balance sheet and implementation of monetary policy. A few participants stated that balance sheet reduction had proceeded smoothly thus far and that various indicators pointed to reserves remaining abundant. Nevertheless, with reserves declining and expected to decline further, they noted that it was important to continue to monitor money market conditions closely and evaluate how close reserves were to their ample level. In that context, a few participants noted that the SRF would help keep the federal funds rate within its target range and ensure that temporary pressures in money markets would not disrupt the ongoing reduction in Federal Reserve securities holdings to the level needed to implement monetary policy efficiently and effectively in the Committee's ample-reserves regime. Committee Policy Actions In their discussions of monetary policy for this meeting, members agreed that recent indicators suggested that growth of economic activity had moderated in the first half of the year. To reflect developments in the labor market, they agreed to no longer characterize labor market conditions as solid and instead state that job gains had slowed and that the unemployment rate had edged up but remained low. Members concurred that inflation remained somewhat elevated and agreed to add that inflation had moved up. They agreed that the Committee was attentive to the risks to both sides of its dual mandate and to add that downside risks to employment had risen to reflect their concerns about the labor market. In support of the Committee's goals and in light of the shift in the balance of risks, almost all members agreed to lower the target range for the federal funds rate 1/4 percentage point to 4 to 4-1/4 percent. One member voted against that decision, preferring to lower the target range 1/2 percentage point at this meeting. Members agreed that, in considering additional adjustments to the target range for the federal funds rate, the Committee would carefully assess incoming data, the evolving outlook, and the balance of risks. All members agreed that the postmeeting statement should affirm their strong commitment both to supporting maximum employment and to returning inflation to the Committee's 2 percent objective. Members agreed that, in assessing the appropriate stance of monetary policy, the Committee would continue to monitor the implications of incoming information for the economic outlook. They would be prepared to adjust the stance of monetary policy as appropriate if risks emerged that could impede the attainment of the Committee's goals. Members also agreed that their assessments would take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments. At the conclusion of the discussion, the Committee voted to direct the Federal Reserve Bank of New York, until instructed otherwise, to execute transactions in the SOMA in accordance with the following domestic policy directive, for release at 2:00 p.m.: "Effective September 18, 2025, the Federal Open Market Committee directs the Desk to: Undertake open market operations as necessary to maintain the federal funds rate in a target range of 4 to 4-1/4 percent. Conduct standing overnight repurchase agreement operations with a minimum bid rate of 4.25 percent and with an aggregate operation limit of $500 billion. Conduct standing overnight reverse repurchase agreement operations at an offering rate of 4 percent and with a per-counterparty limit of $160 billion per day. Roll over at auction the amount of principal payments from the Federal Reserve's holdings of Treasury securities maturing in each calendar month that exceeds a cap of $5 billion per month. Redeem Treasury coupon securities up to this monthly cap and Treasury bills to the extent that coupon principal payments are less than the monthly cap. Reinvest the amount of principal payments from the Federal Reserve's holdings of agency debt and agency mortgage-backed securities (MBS) received in each calendar month that exceeds a cap of $35 billion per month into Treasury securities to roughly match the maturity composition of Treasury securities outstanding. Allow modest deviations from stated amounts for reinvestments, if needed for operational reasons." The vote also encompassed approval of the statement below for release at 2:00 p.m.: "Recent indicators suggest that growth of economic activity moderated in the first half of the year. Job gains have slowed, and the unemployment rate has edged up but remains low. Inflation has moved up and remains somewhat elevated. The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty about the economic outlook remains elevated. The Committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment have risen. In support of its goals and in light of the shift in the balance of risks, the Committee decided to lower the target range for the federal funds rate by 1/4 percentage point to 4 to 4-1/4 percent. In considering additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities. The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective. In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals. The Committee's assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments." Voting for this action: Jerome H. Powell, John C. Williams, Michael S. Barr, Michelle W. Bowman, Susan M. Collins, Lisa D. Cook, Austan D. Goolsbee, Philip N. Jefferson, Alberto G. Musalem, Jeffrey R. Schmid, and Christopher J. Waller. Voting against this action: Stephen I. Miran. Governor Miran preferred to lower the target range for the federal funds rate by 1/2 percentage point at this meeting in light of further softening in the labor market over the first half of the year and underlying inflation that in his view was meaningfully closer to 2 percent than was apparent in the data. Governor Miran also expressed the view that additional policy easing was also appropriate to reflect that the neutral rate of interest had fallen due to factors such as increased tariff revenues that had raised net national savings and changes in immigration policy that had reduced population growth. Consistent with the Committee's decision to lower the target range for the federal funds rate to 4 to 4-1/4 percent, the Board of Governors of the Federal Reserve System voted to lower the interest rate paid on reserve balances to 4.15 percent, effective September 18, 2025. The Board of Governors of the Federal Reserve System voted to approve a 1/4 percentage point decrease in the primary credit rate to 4.25 percent, effective September 18, 2025. 2 It was agreed that the next meeting of the Committee would be held on Tuesday–Wednesday, October 28–29, 2025. The meeting adjourned at 10:10 a.m. on September 17, 2025. Notation Vote By notation vote completed on August 19, 2025, the Committee unanimously approved the minutes of the Committee meeting held on July 29–30, 2025. Attendance Jerome H. Powell, Chair John C. Williams, Vice Chair Michael S. Barr Michelle W. Bowman Susan M. Collins Lisa D. Cook Austan D. Goolsbee Philip N. Jefferson Stephen I. Miran Alberto G. Musalem Jeffrey R. Schmid Christopher J. Waller Beth M. Hammack, Neel Kashkari, Lorie K. Logan, Anna Paulson, and Sushmita Shukla, Alternate Members of the Committee Thomas I. Barkin, Raphael W. Bostic, and Mary C. Daly, Presidents of the Federal Reserve Banks of Richmond, Atlanta, and San Francisco, respectively Joshua Gallin, Secretary Matthew M. Luecke, Deputy Secretary Brian J. Bonis, Assistant Secretary Michelle A. Smith, Assistant Secretary Mark E. Van Der Weide, General Counsel Richard Ostrander, Deputy General Counsel Trevor A. Reeve, Economist Stacey Tevlin, Economist Beth Anne Wilson, Economist Shaghil Ahmed and William Wascher, Associate Economists Roberto Perli, Manager, System Open Market Account Julie Ann Remache, Deputy Manager, System Open Market Account Daniel Aaronson, Interim Director of Research, Federal Reserve Bank of Chicago Jose Acosta, Senior System Engineer II, Division of Information Technology, Board Mary L. Aiken, Acting Director, Division of Supervision and Regulation, Board Oladoyin Ajifowoke, Program Management Analyst, Division of Monetary Affairs, Board Roc Armenter, Executive Vice President, Federal Reserve Bank of Philadelphia Alyssa Arute, 3 Assistant Director, Division of Reserve Bank Operations and Payment Systems, Board Alessandro Barbarino, Special Adviser to the Board, Division of Board Members, Board William F. Bassett, Senior Associate Director, Division of Financial Stability, Board Erik Bostrom, Senior Financial Institution Policy Analyst I, Division of Monetary Affairs, Board Ellen J. Bromagen, First Vice President, Federal Reserve Bank of Chicago Brent Bundick, Vice President, Federal Reserve Bank of Kansas City Michele Cavallo, Special Adviser to the Board, Division of Board Members, Board Lisa M. Chung, 3 Capital Markets Trading Director, Federal Reserve Bank of New York Juan Carlos Climent, Special Adviser to the Board, Division of Board Members, Board Daniel M. Covitz, Deputy Director, Division of Research and Statistics, Board Stephanie E. Curcuru, Deputy Director, Division of International Finance, Board Andrea De Michelis, Deputy Associate Director, Division of International Finance, Board Marnie Gillis DeBoer, Senior Associate Director, Division of Monetary Affairs, Board Anthony M. Diercks, Principal Economist, Division of Monetary Affairs, Board Laura J. Feiveson, Special Adviser to the Board, Division of Board Members, Board Glenn Follette, Associate Director, Division of Research and Statistics, Board Brian Gowen, 3 Capital Markets Trading Principal, Federal Reserve Bank of New York Christopher J. Gust, Associate Director, Division of Monetary Affairs, Board Valerie S. Hinojosa, Section Chief, Division of Monetary Affairs, Board Colin J. Hottman, Principal Economist, Division of International Finance, Board Matteo Iacoviello, Senior Associate Director, Division of International Finance, Board Jane E. Ihrig, Special Adviser to the Board, Division of Board Members, Board Benjamin K. Johannsen, Assistant Director, Division of Monetary Affairs, Board Michael T. Kiley, Deputy Director, Division of Monetary Affairs, Board Elizabeth Klee, Deputy Director, Division of Monetary Affairs, Board Edward S. Knotek II, Senior Vice President, Federal Reserve Bank of Cleveland Anna R. Kovner, Executive Vice President, Federal Reserve Bank of Richmond Andreas Lehnert, Director, Division of Financial Stability, Board Paul Lengermann, Deputy Associate Director, Division of Research and Statistics, Board Kurt F. Lewis, Special Adviser to the Chair, Division of Board Members, Board Laura Lipscomb, Special Adviser to the Board, Division of Board Members, Board David López-Salido, 4 Senior Associate Director, Division of Monetary Affairs, Board Byron Lutz, Deputy Associate Director, Division of Research and Statistics, Board Fernando M. Martin, Senior Economic Policy Advisor II, Federal Reserve Bank of St. Louis Benjamin W. McDonough, Deputy Secretary and Ombudsman, Office of the Secretary, Board Brent H. Meyer, Assistant Vice President, Federal Reserve Bank of Atlanta Norman J. Morin, Associate Director, Division of Research and Statistics, Board Anna Nordstrom, Head of Markets, Federal Reserve Bank of New York Nicolas Petrosky-Nadeau, Vice President, Federal Reserve Bank of San Francisco Caterina Petrucco-Littleton, Deputy Associate Director, Division of Consumer and Community Affairs, Board; Special Adviser to the Board, Division of Board Members, Board Eugenio P. Pinto, Special Adviser to the Board, Division of Board Members, Board Odelle Quisumbing, 3 Assistant to the Secretary, Office of the Secretary, Board Andrea Raffo, Senior Vice President, Federal Reserve Bank of Minneapolis Jeanne Rentezelas, First Vice President, Federal Reserve Bank of Philadelphia Argia Sbordone, Research Department Head, Federal Reserve Bank of New York Kirk Schwarzbach, Special Assistant to the Board, Division of Board Members, Board Zeynep Senyuz, Special Adviser to the Board, Division of Board Members, Board John J. Stevens, Senior Associate Director, Division of Research and Statistics, Board Jenny Tang, Vice President, Federal Reserve Bank of Boston Manjola Tase, Principal Economist, Division of Monetary Affairs, Board Mary H. Tian, Group Manager, Division of Monetary Affairs, Board Annette Vissing-Jørgensen, Senior Adviser, Division of Monetary Affairs, Board Jeffrey D. Walker, 3 Senior Associate Director, Division of Reserve Bank Operations and Payment Systems, Board Rebecca Zarutskie, Senior Vice President, Federal Reserve Bank of Dallas Andrei Zlate, Group Manager, Division of Monetary Affairs, Board _______________________ Joshua Gallin Secretary 1. The Federal Open Market Committee is referenced as the "FOMC" and the "Committee" in these minutes; the Board of Governors of the Federal Reserve System is referenced as the "Board" in these minutes. Return to text 2. In taking this action, the Board approved requests to establish that rate submitted by the Boards of Directors of the Federal Reserve Banks of Boston, New York, Philadelphia, Richmond, Atlanta, Chicago, Minneapolis, Kansas City, Dallas, and San Francisco. The vote also encompassed approval by the Board of Governors of the establishment of a 4.25 percent primary credit rate by the remaining Federal Reserve Banks, effective on September 18, 2025, or the date such Reserve Banks inform the Secretary of the Board of such a request. (Secretary's note: Subsequently, the Federal Reserve Banks of Cleveland and St. Louis were informed of the Board's approval of their establishment of a primary credit rate of 4.25 percent, effective September 18, 2025.) Return to text 3. Attended through the discussion of developments in financial markets and open market operations. Return to text 4. Attended opening remarks for Tuesday session only. Return to text

Minutes of the Federal Open Market Committee July 29–30, 2025 A joint meeting of the Federal Open Market Committee and the Board of Governors of the Federal Reserve System was held in the offices of the Board of Governors on Tuesday, July 29, 2025, at 9:00 a.m. and continued on Wednesday, July 30, 2025, at 9:00 a.m. 1 Review of Monetary Policy Strategy, Tools, and Communications Participants continued their discussion related to the ongoing review of the Federal Reserve's monetary policy strategy, tools, and communication practices (framework review). They observed that they had made important progress toward revising the Committee's Statement on Longer-Run Goals and Monetary Policy Strategy (consensus statement). Participants discussed potential revisions to the consensus statement that would incorporate lessons learned from economic developments since the 2020 framework review and would be designed to be robust across a wide range of economic conditions. Participants noted that the Committee was close to finalizing changes to the consensus statement and would do so in the near future. Developments in Financial Markets and Open Market Operations The manager turned first to a review of financial market developments. Over the intermeeting period, the expected path of the policy rate and longer-term Treasury yields were little changed, equity prices increased, credit spreads narrowed, and the dollar depreciated slightly. The manager noted that markets continued to be attentive to news related to trade policy, though markets' reaction to incoming information on this topic was more restrained than in April and May. Against this backdrop, the manager reported that the Open Market Desk's Survey of Market Expectations (Desk survey) indicated that the median respondent's expectations regarding both real gross domestic product (GDP) growth and inflation were roughly unchanged. The manager turned next to policy rate expectations, which held steady over the intermeeting period, consistent with a relatively stable macroeconomic outlook. The median modal path of the federal funds rate, as given in the Desk survey, was unchanged from the corresponding path in the June survey and continued to indicate expectations of two 25 basis point rate cuts in the second half of this year. Market-based measures of policy rate expectations were also little changed and indicated expectations of one to two 25 basis point rate cuts by the end of the year. The manager then discussed developments in Treasury securities markets and market-based measures of inflation compensation. Nominal Treasury yields were little changed, on net, over the intermeeting period, consistent with the lack of appreciable changes in the macroeconomic outlook and in policy rate expectations. Perceived risks associated with trade policy developments contributed to an increase in near-term market measures of inflation compensation, while longer-horizon measures of inflation compensation rose more modestly. The manager then turned to market pricing of risky assets. The increases in equity prices and narrowing of credit spreads suggested that markets assessed that the overall U.S. economy was remaining resilient; still, financial markets appeared to be making distinctions between individual corporations on the basis of the size and quality of their earnings. Valuations of the S&P 500 index continued to move above long-run average levels, mostly driven by optimism about the largest technology firms' scope to benefit from the further adoption of artificial intelligence (AI). However, valuations of an index of smaller-capitalization firms, although higher over the intermeeting period, remained below their historical averages. Regarding foreign exchange developments, the manager noted that the broad trade-weighted dollar index had continued to depreciate since the previous FOMC meeting but at a slower pace than in recent intermeeting periods. At the same time, the manager noted that correlations between the dollar and its fundamental drivers had normalized recently. The available data continued to suggest relative stability in foreign holdings of U.S. assets. The manager turned next to money markets. Unsecured overnight rates remained stable over the intermeeting period. Rates on Treasury repurchase agreements (repo) were somewhat higher than the low levels seen in the previous intermeeting period. The manager observed that two factors contributed to this slight increase: the normal upward pressure on money market rates associated with the June quarter-end; and the rise in net Treasury bill issuance amid the rebuilding of the Treasury General Account (TGA) balance following the increase in the debt limit in early July. On June 30, as market rates climbed modestly above the standing repo facility's (SRF) minimum bid rate at quarter-end, there was material usage of the facility, with counterparties borrowing a bit more than $11 billion, the highest utilization to date. The manager also discussed the projected trajectory of various Federal Reserve liabilities. With increased Treasury bill issuance associated with the rebuilding of the TGA balance likely to result in a rise in money market rates, take-up at the overnight reverse repurchase agreement (ON RRP) facility was expected to decline to low levels relatively soon. Market indicators continued to suggest that reserves remained abundant; however, ongoing System Open Market Account (SOMA) portfolio runoff, a substantial expected increase in the TGA balance, and the depletion of the ON RRP facility were together likely to bring about a sustained decline in reserves for the first time since portfolio runoff started in June 2022. Against this backdrop, the staff would continue to monitor indicators of reserve conditions closely. The manager also noted that there would be times—such as quarter-ends, tax dates, and days associated with large settlements of Treasury securities—when reserves were likely to dip temporarily to even lower levels. At those times, utilization of the SRF would likely support the smooth functioning of money markets and the implementation of monetary policy. By unanimous vote, the Committee ratified the Desk's domestic transactions over the intermeeting period. There were no intervention operations in foreign currencies for the System's account during the intermeeting period. Staff Review of the Economic Situation The information available at the time of the meeting indicated that real GDP expanded at a tepid pace in the first half of the year. The unemployment rate continued to be low, and consumer price inflation remained somewhat elevated. Disinflation appeared to have stalled, with tariffs putting upward pressure on goods price inflation. Total consumer price inflation—as measured by the 12-month change in the price index for personal consumption expenditures (PCE)—was estimated to have been 2.5 percent in June, based on the consumer and producer price indexes. Core PCE price inflation, which excludes changes in consumer energy prices and many consumer food prices, was estimated to have been 2.7 percent in June. Both inflation rates were similar to their year-earlier levels. Recent data indicated that labor market conditions remained solid. The unemployment rate was 4.1 percent in June, down 0.1 percentage point from May. The participation rate edged down 0.1 percentage point in June, and the employment-to-population ratio was unchanged. Total nonfarm payroll gains were solid in June, though the pace of private payroll gains stepped down noticeably. The ratio of job vacancies to unemployed workers was 1.1 in June and remained within the narrow range seen over the past year. Average hourly earnings for all employees rose 3.7 percent over the 12 months ending in June, slightly lower than the year-earlier pace. According to the advance estimate, real GDP rose in the second quarter after declining in the first quarter. Growth of real private domestic final purchases—which comprises PCE and private fixed investment and which often provides a better signal than GDP of underlying economic momentum—slowed in the second quarter, as a step-down in investment growth offset faster PCE growth. After exerting a substantial negative drag on GDP growth in the first quarter, net exports made a large positive contribution in the second quarter. Real imports of goods and services declined sharply, likely reflecting the aftereffects of the substantial front-loading of imports recorded in the first quarter ahead of anticipated tariff hikes. By contrast, exports of goods declined at a more moderate pace, and exports of services rose further. Abroad, activity indicators pointed to a slowdown of foreign economic growth in the second quarter, as the transitory boost due to the front-loading of U.S. imports earlier in the year faded. Of note, monthly GDP data through May indicated that economic activity contracted in Canada. China's GDP, however, continued to expand at a moderate pace in the second quarter, supported by solid domestic spending. Headline inflation rates were near targets in most foreign economies, held down by past declines in oil prices and fading wage pressures following a tightening in monetary policy stances over the past few years. However, core inflation remained somewhat elevated in some foreign economies. Over the intermeeting period, several foreign central banks, such as the Bank of Mexico and the Swiss National Bank, further eased their monetary policy stance, while others, such as the Bank of England and the European Central Bank, held their policy rates steady. In their communications, foreign central banks continued to emphasize that U.S. trade policies and accompanying uncertainty have started to weigh on economic activity in their economies. Staff Review of the Financial Situation Over the intermeeting period, both the market-implied expected path of the federal funds rate over the next year and nominal Treasury yields were little changed, on net, while real yields declined. Inflation compensation rose across the maturity spectrum—particularly at shorter horizons—reflecting, at least in part, perceived risks associated with trade policy developments. Broad equity price indexes increased and credit spreads tightened, consistent with improving risk sentiment attributed in part to easing geopolitical tensions as well as stronger-than-expected economic activity. Credit spreads for all rating categories except the lowest-quality bonds narrowed to exceptionally low levels relative to their historical distribution. The VIX—a forward-looking measure of near-term equity market volatility—declined moderately to just below the median of its historical distribution. Over the intermeeting period, news about trade policy interpreted as positive by investors together with some easing of geopolitical tensions in the Middle East led to moderate increases in foreign equity prices and longer-term yields. The broad dollar index was little changed on net. Conditions in U.S. short-term funding markets remained orderly over the intermeeting period while displaying typical quarter-end dynamics. The One Big Beautiful Bill Act, which became law on July 4, ended the previous debt issuance suspension period, after which the TGA balance increased from $313 billion on July 3 to an expected $500 billion by the end of July. Rates in secured markets were, on average, somewhat elevated relative to the average over the previous intermeeting period, owing in part to quarter-end effects. Although upward pressure on repo rates was modest at quarter-end, take-up at the SRF was $11.1 billion on June 30—its highest level since the inception of the facility—as the addition of an early settlement option seemed to encourage participation. Average usage of the ON RRP facility was little changed over the intermeeting period. In domestic credit markets, borrowing costs facing businesses, households, and municipalities eased moderately but remained elevated relative to post-Global Financial Crisis (GFC) average levels. Yields on both corporate bonds and leveraged loans declined modestly, while interest rates on small business loans were little changed on net. Rates on 30-year fixed-rate conforming residential mortgages were little changed and remained near the top of the post-GFC historical distribution. Interest rates on new auto loans and for new credit card offers have fluctuated in a narrow range in recent months around the upper end of their post-GFC distributions. Credit remained generally available. Financing through capital markets and nonbank lenders was readily accessible for public corporations as well as large and middle-market private corporations. Issuance of nonfinancial corporate bonds and leveraged loans was solid in June, and private credit continued to be broadly available despite ebbing somewhat in May and June. Loan balances on banks' books increased at a moderate pace in the second quarter, led by growth in commercial and industrial (C&I) loans. Lending to small businesses remained subdued, an outcome attributed to weak borrower demand. Banks in the July Senior Loan Officer Opinion Survey on Bank Lending Practices reported that, on net, underwriting standards were little changed in the second quarter across most loan categories, although the level of standards remained on the tighter end of their historical range. C&I loan standards, however, were reported to be a little easier than the range seen since 2005, yet still somewhat tighter than in periods not associated with financial stress. Consumer credit continued to be readily available for high-credit-score borrowers, though growth in applications for home purchases, refinances, auto loans, and revolving credit was relatively weak, reflecting heightened borrowing costs and tighter credit standards for lower-credit-score borrowers. In the second quarter, credit performance was generally stable but somewhat weaker than pre-pandemic levels. Corporate bond and leveraged loan credit performance declined moderately in May and June, though defaults remained below post-GFC medians through June. In the commercial real estate market, delinquency rates on commercial mortgage-backed securities remained elevated through June. The rate of serious delinquencies on Federal Housing Administration mortgages continued to be elevated. By contrast, delinquency rates on most other mortgage loan types continued to stay near historical lows. In May, the credit card delinquency rate was a little below its year-earlier value, while that for auto loans was roughly the same as in May last year; both were elevated relative to their pre-pandemic levels. Student loan delinquencies reported to credit bureaus shot up in the first quarter of the year after the expiration of the on-ramp period for student loan payments. The staff provided an updated assessment of the stability of the U.S. financial system and, on balance, continued to characterize the system's financial vulnerabilities as notable. The staff judged that asset valuation pressures were elevated. In equity markets, price-to-earnings ratios stood at the upper end of their historical distribution, while spreads on high-yield corporate bonds narrowed notably and were low relative to their historical distribution. Housing valuations edged down but remained elevated. Vulnerabilities associated with nonfinancial business and household debt were characterized as moderate. Household debt to GDP was at its lowest level in the past 20 years, and household balance sheets remained strong. The ability of publicly traded firms to service their debt remained solid. For private firms, debt grew at a rapid pace, while these firms' interest coverage ratios declined to the lower range of their historical distributions, suggesting that vulnerabilities may be growing in that sector. Vulnerabilities associated with leverage in the financial sector were characterized as notable. Regulatory capital ratios in the banking sector remained high, while recent annual supervisory stress-test results showed that all participants stayed above minimum capital requirements even under stress conditions. Banks, however, were still seen as more exposed to interest rate risk than had been historically typical, albeit to a lesser degree than was the case earlier in the decade. In the nonbank sector, life insurers' allocation of assets toward private credit and risky assets, funded in part by nontraditional liabilities with short maturities, continued to grow. Leverage and rollover risk at hedge funds remained high and concentrated in the largest firms. Vulnerabilities associated with funding risks were characterized as moderate. Money market funds (MMFs) continued to be vulnerable to runs, though the aggregate assets of such prime and prime-like investment vehicles remained in the middle of their historical range as a fraction of GDP. Prime-like alternatives—including private liquidity funds, offshore MMFs, and stablecoins—have grown rapidly and were noted as relatively less transparent. Staff Economic Outlook The staff's real GDP growth projection for this year through 2027 was similar to the one prepared for the June meeting, reflecting the offsetting effects of several revisions to the outlook. The staff expected that the rise in the cost of imported goods inclusive of tariffs would be smaller and occur later than in their previous forecast; in addition, financial conditions were projected to be slightly more supportive of output growth. However, these positive influences on the outlook were offset by weaker-than-expected spending data and a smaller assumed population boost from net immigration. The staff continued to expect that the labor market would weaken, with the unemployment rate projected to move above the staff's estimate of its natural rate around the end of this year and to remain above the natural rate through 2027. The staff's inflation projection was slightly lower than the one prepared for the June meeting, reflecting the downward revision to the assumed effects of tariffs on imported goods prices. Tariffs were expected to raise inflation this year and to provide some further upward pressure on inflation in 2026; inflation was then projected to decline to 2 percent by 2027. The staff continued to view the uncertainty around the projection as elevated, primarily reflecting uncertainty regarding changes to economic policies, including trade policy, and their associated economic effects. Risks to real activity were judged to remain skewed to the downside in light of the weakening in GDP growth seen so far this year and elevated policy uncertainty. The staff continued to view the risks around the inflation forecast as skewed to the upside, as the projected rise in inflation this year could prove to be more persistent than assumed in the baseline projection. Participants' Views on Current Conditions and the Economic Outlook In their discussion of inflation, many participants observed that overall inflation remained somewhat above the Committee's 2 percent longer-run goal. Participants noted that tariff effects were becoming more apparent in the data, as indicated by recent increases in goods price inflation, while services price inflation had continued to slow. A couple of participants suggested that tariff effects were masking the underlying trend of inflation and, setting aside the tariff effects, inflation was close to target. With regard to the outlook for inflation, participants generally expected inflation to increase in the near term. Participants judged that considerable uncertainty remained about the timing, magnitude, and persistence of the effects of this year's increase in tariffs. In terms of timing, many participants noted that it could take some time for the full effects of higher tariffs to be felt in consumer goods and services prices. Participants cited several contributors to this likely lag. These included the stockpiling of inventories in anticipation of higher tariffs; slow pass-through of input cost increases into final goods and services prices; gradual updating of contract prices; maintenance of firm–customer relationships; issues related to tariff collection; and still-ongoing trade negotiations. As for the magnitude of tariff effects on prices, a few participants observed that evidence so far suggested that foreign exporters were paying at most a modest part of the increased tariffs, implying that domestic businesses and consumers were predominantly bearing the tariff costs. Several participants, drawing on information provided by business contacts or business surveys, expected that many companies would increasingly have to pass through tariff costs to end-customers over time. However, a few participants reported that business contacts and survey respondents described a mix of strategies as being undertaken to avoid fully passing on tariff costs to customers. Such strategies included negotiating with or switching suppliers, changing production processes, lowering profit margins, exerting more wage discipline, or exploiting cost-saving efficiency measures such as automation and new technologies. A few participants stressed that current demand conditions were limiting firms' ability to pass tariff costs into prices. Regarding inflation persistence, a few participants emphasized that they expected higher tariffs to lead only to a one-time increase in the price level that would be realized over a reasonably contained period. A few participants remarked that tariff-related factors, including supply chain disruptions, could lead to stubbornly elevated inflation and that it may be difficult to disentangle tariff-related price increases from changes in underlying trend inflation. Participants noted that longer-term inflation expectations continued to be well anchored and that it was important that they remain so. Several participants emphasized that inflation had exceeded 2 percent for an extended period and that this experience increased the risk of longer-term inflation expectations becoming unanchored in the event of drawn-out effects of higher tariffs on inflation. A couple of participants noted that inflation expectations would likely be influenced by the behavior of the overall inflation rate, inclusive of the effects of tariffs. Various participants emphasized the central role of monetary policy in ensuring that tariff effects did not lead to persistently higher expected and realized inflation. In their discussion of the labor market, participants observed that the unemployment rate remained low and that employment was at or near estimates of maximum employment. Several participants noted that the low and stable unemployment rate reflected a combination of low hiring and low layoffs. Some participants observed that their contacts and business survey respondents had reported being reluctant to hire or fire amid elevated uncertainty. Regarding the outlook for the labor market, some participants mentioned indicators that could suggest a softening in labor demand. These included slower and more concentrated job growth, an increase in cyclically sensitive Black and youth unemployment rates, and lower wage increases of job switchers than job stayers. Some of these participants also noted anecdotes in the Beige Book or in their discussions with contacts that pointed to slower demand. Furthermore, a number of participants noted that softness in aggregate demand and economic activity may translate into weaker labor market conditions, as could a potential inability of some importers to withstand higher tariffs. Some participants remarked, however, that slower output or employment growth was not necessarily indicative of emerging economic slack because a decline in immigration was lowering both actual and potential output growth as well as reducing both actual payroll growth and the number of new jobs needed to keep the unemployment rate stable. A few participants relayed reports received from contacts that immigration policies were affecting labor supply in some sectors, including construction and agriculture. Participants observed that growth of economic activity slowed in the first half of the year, driven in large part by slower consumption growth and a decline in residential investment. Several participants stated that they expected growth in economic activity to remain low in the second half of this year. Some participants noted that economic activity would nevertheless be supported by financial conditions, including elevated household net worth, and a couple of participants highlighted stable or low credit card delinquencies. A couple of participants remarked that economic activity would be supported by the resolution of policy uncertainty over time. Regarding the household sector, several participants observed that slower real income growth may be weighing on growth in consumer spending. A few participants noted a weakening in housing demand, with increased availability of homes for sale and falling house prices. As for businesses, several participants remarked that ongoing policy uncertainty had continued to slow business investment, but several observed that business sentiment had improved in recent months. A few participants commented that the agricultural sector faced headwinds due to low crop prices. In their evaluation of the risks and uncertainties associated with the economic outlook, participants judged that uncertainty about the economic outlook remained elevated, though several participants remarked that there had been some reduction in uncertainty regarding fiscal policy, immigration policy, or tariff policy. Participants generally pointed to risks to both sides of the Committee's dual mandate, emphasizing upside risk to inflation and downside risk to employment. A majority of participants judged the upside risk to inflation as the greater of these two risks, while several participants viewed the two risks as roughly balanced, and a couple of participants considered downside risk to employment the more salient risk. Regarding upside risks to inflation, participants pointed to the uncertain effects of tariffs and the possibility of inflation expectations becoming unanchored. In addition to tariff-induced risks, potential downside risks to employment mentioned by participants included a possible tightening of financial conditions due to a rise in risk premiums, a more substantial deterioration in the housing market, and the risk that the increased use of AI in the workplace may lower employment. In their discussion of financial stability, participants who commented noted vulnerabilities to the financial system that they assessed warranted monitoring. Several participants noted concerns about elevated asset valuation pressures. Regarding banks, a couple of participants commented that, though regulatory capital levels remained strong, some banks continued to be vulnerable to a rise in longer-term yields and the associated unrealized losses on bank assets. A few participants commented on vulnerabilities in the market for Treasury securities, raising concerns about dealer intermediation capacity, the increasing presence of hedge funds in the market, and the fragility associated with low market depth. A couple of participants discussed foreign exchange swaps, noting that these served as key sources of dollar funding for foreign financial institutions that lend dollars to their customers in the U.S. and abroad, but also that they entailed vulnerabilities due to maturity mismatch and rollover risk. Many participants discussed recent and prospective developments related to payment stablecoins and possible implications for the financial system. These participants noted that use of payment stablecoins might grow following the recent passage of the GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins Act). They remarked that payment stablecoins could help improve the efficiency of the payment system. They also observed that such stablecoins could increase the demand for the assets needed to back them, including Treasury securities. In addition, participants who commented raised concerns that stablecoins could have broader implications for the banking and financial systems as well as monetary policy implementation, and thus warranted close attention, including monitoring of the various assets used to back stablecoins. In their consideration of monetary policy at this meeting, participants noted that inflation remained somewhat elevated. Participants also observed that recent indicators suggested that the growth of economic activity had moderated in the first half of the year, although swings in net exports and inventories had affected the measurement and interpretation of the data. Participants further noted that the unemployment rate remained at a low level and that the labor market was at or near maximum employment. Participants judged that uncertainty about the economic outlook remained elevated. Almost all participants viewed it as appropriate to maintain the target range for the federal funds rate at 4-1/4 to 4-1/2 percent at this meeting. All participants judged it appropriate to continue the process of reducing the Federal Reserve's securities holdings. In considering the outlook for monetary policy, almost all participants agreed that, with the labor market still solid and current monetary policy moderately or modestly restrictive, the Committee was well positioned to respond in a timely way to potential economic developments. Participants agreed that monetary policy would be informed by a wide range of incoming data, the economic outlook, and the balance of risks. Participants assessed that the effects of higher tariffs had become more apparent in the prices of some goods but that their overall effects on economic activity and inflation remained to be seen. They also noted that it would take time to have more clarity on the magnitude and persistence of higher tariffs' effects on inflation. Even so, some participants emphasized that a great deal could be learned in coming months from incoming data, helping to inform their assessment of the balance of risks and the appropriate setting of the federal funds rate; at the same time, some noted that it would not be feasible or appropriate to wait for complete clarity on the tariffs' effects on inflation before adjusting the stance of monetary policy. Some participants stressed that the issue of the persistence of tariff effects on inflation would depend importantly on the stance of monetary policy. Several participants commented that the current target range for the federal funds rate may not be far above its neutral level; among the considerations cited in support of this assessment was the likelihood that broader financial conditions were either neutral or supportive of stronger economic activity. In discussing risk-management considerations that could bear on the outlook for monetary policy, participants generally agreed that the upside risk to inflation and the downside risk to employment remained elevated. Participants noted that, if this year's higher tariffs were to generate a larger-than-expected or a more-persistent-than-anticipated increase in inflation, or if medium- or longer-term inflation expectations were to increase notably, then it would be appropriate to maintain a more restrictive stance of monetary policy than would otherwise be the case, especially if labor market conditions remained solid. By contrast, if labor market conditions were to weaken materially or if inflation were to come down further and inflation expectations remained well anchored, then it would be appropriate to establish a less restrictive stance of monetary policy than would otherwise be the case. Participants noted that the Committee might face difficult tradeoffs if elevated inflation proved to be more persistent while the outlook for the labor market weakened. Participants agreed that, if that situation were to occur, they would consider each variable's distance from the Committee's goal and the potentially different time horizons over which those respective gaps would be anticipated to close. Participants noted that, in this context, it was especially important to ensure that longer-term inflation expectations remained well anchored. Several participants remarked on issues related to the Federal Reserve's balance sheet. Of those who commented, participants observed that balance sheet reduction had been proceeding smoothly thus far and that various indicators pointed to reserves being abundant. They agreed that, with reserves projected to decline amid the rebuilding of the TGA balance following the resolution of the debt limit situation, it was important to monitor money market conditions closely and to continue to evaluate how close reserves were to their ample level. A few participants also assessed that, in this environment, abrupt further declines in reserves could occur on key reporting and payment flow days. They noted that, if such events created pressures in money markets, the Federal Reserve's existing tools would help supply additional reserves and keep the effective federal funds rate within the target range. A couple of participants highlighted the role of the SRF in monetary policy implementation—as reflected in increased usage at the June quarter-end—and expressed support for further study of the possibility of central clearing of the SRF to enhance its effectiveness. Committee Policy Actions In their discussions of monetary policy for this meeting, members agreed that although swings in net exports had affected the data, recent indicators suggested that the growth of economic activity had moderated in the first half of the year. Members agreed that the unemployment rate had remained at a low level and that labor market conditions had remained solid. Members concurred that inflation remained somewhat elevated. Members agreed that uncertainty about the economic outlook remained elevated and that the Committee was attentive to the risks to both sides of its dual mandate. In support of the Committee's goals, almost all members agreed to maintain the target range for the federal funds rate at 4-1/4 to 4-1/2 percent. A couple of members preferred to lower the target range for the federal funds rate by 25 basis points at this meeting. These members judged that, excluding tariff effects, inflation was running close to the Committee's 2 percent objective and that higher tariffs were unlikely to have persistent effects on inflation. Furthermore, they assessed that downside risk to employment had meaningfully increased with the slowing of the growth of economic activity and consumer spending, and that some incoming data pointed to a weakening of labor market conditions, including low levels of private payroll gains and the concentration of payroll gains in a narrow set of industries that were less affected by the business cycle. Members agreed that in considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee would carefully assess incoming data, the evolving outlook, and the balance of risks. All members agreed that the postmeeting statement should affirm their strong commitment both to supporting maximum employment and to returning inflation to the Committee's 2 percent objective. Members agreed that, in assessing the appropriate stance of monetary policy, the Committee would continue to monitor the implications of incoming information for the economic outlook. They would be prepared to adjust the stance of monetary policy as appropriate if risks emerged that could impede the attainment of the Committee's goals. Members also agreed that their assessments would take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments. At the conclusion of the discussion, the Committee voted to direct the Federal Reserve Bank of New York, until instructed otherwise, to execute transactions in the SOMA in accordance with the following domestic policy directive, for release at 2:00 p.m.: "Effective July 31, 2025, the Federal Open Market Committee directs the Desk to: Undertake open market operations as necessary to maintain the federal funds rate in a target range of 4-1/4 to 4-1/2 percent. Conduct standing overnight repurchase agreement operations with a minimum bid rate of 4.5 percent and with an aggregate operation limit of $500 billion. Conduct standing overnight reverse repurchase agreement operations at an offering rate of 4.25 percent and with a per-counterparty limit of $160 billion per day. Roll over at auction the amount of principal payments from the Federal Reserve's holdings of Treasury securities maturing in each calendar month that exceeds a cap of $5 billion per month. Redeem Treasury coupon securities up to this monthly cap and Treasury bills to the extent that coupon principal payments are less than the monthly cap. Reinvest the amount of principal payments from the Federal Reserve's holdings of agency debt and agency mortgage-backed securities (MBS) received in each calendar month that exceeds a cap of $35 billion per month into Treasury securities to roughly match the maturity composition of Treasury securities outstanding. Allow modest deviations from stated amounts for reinvestments, if needed for operational reasons." The vote also encompassed approval of the statement below for release at 2:00 p.m.: "Although swings in net exports continue to affect the data, recent indicators suggest that growth of economic activity moderated in the first half of the year. The unemployment rate remains low, and labor market conditions remain solid. Inflation remains somewhat elevated. The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty about the economic outlook remains elevated. The Committee is attentive to the risks to both sides of its dual mandate. In support of its goals, the Committee decided to maintain the target range for the federal funds rate at 4-1/4 to 4-1/2 percent. In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities. The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective. In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals. The Committee's assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments." Voting for this action: Jerome H. Powell, John C. Williams, Michael S. Barr, Susan M. Collins, Lisa D. Cook, Austan D. Goolsbee, Philip N. Jefferson, Alberto G. Musalem, and Jeffrey R. Schmid. Voting against this action: Michelle W. Bowman and Christopher J. Waller. Absent and not voting: Adriana D. Kugler Governors Bowman and Waller preferred to lower the target range for the federal funds rate by 1/4 percentage point at this meeting. Governor Bowman preferred at this meeting to lower the target range for the federal funds rate by 25 basis points to 4 to 4-1/4 percent in light of inflation moving considerably closer to the Committee's objective, after excluding temporary effects of tariffs, a labor market near full employment but with signs of less dynamism, and slowing economic growth this year. She also expressed her view that taking action to begin moving the policy rate at a gradual pace toward its neutral level would have proactively hedged against a further weakening in the economy and the risk of damage to the labor market. Consistent with the Committee's decision to leave the target range for the federal funds rate unchanged, the Board of Governors of the Federal Reserve System voted unanimously to maintain the interest rate paid on reserve balances at 4.4 percent, effective July 31, 2025. The Board of Governors of the Federal Reserve System voted unanimously to approve the establishment of the primary credit rate at the existing level of 4.5 percent. It was agreed that the next meeting of the Committee would be held on Tuesday–Wednesday, September 16–17, 2025. The meeting adjourned at 10:15 a.m. on July 30, 2025. Notation Vote By notation vote completed on July 8, 2025, the Committee unanimously approved the minutes of the Committee meeting held on June 17–18, 2025. Attendance Jerome H. Powell, Chair John C. Williams, Vice Chair Michael S. Barr Michelle W. Bowman Susan M. Collins Lisa D. Cook Austan D. Goolsbee Philip N. Jefferson Alberto G. Musalem Jeffrey R. Schmid Christopher J. Waller Beth M. Hammack, Neel Kashkari, Lorie K. Logan, Anna Paulson, and Sushmita Shukla, Alternate Members of the Committee Thomas I. Barkin, Raphael W. Bostic, and Mary C. Daly, Presidents of the Federal Reserve Banks of Richmond, Atlanta, and San Francisco, respectively Joshua Gallin, Secretary Matthew M. Luecke, Deputy Secretary Brian J. Bonis, Assistant Secretary Michelle A. Smith, Assistant Secretary Mark E. Van Der Weide, General Counsel Richard Ostrander, Deputy General Counsel Trevor A. Reeve, Economist Stacey Tevlin, Economist Beth Anne Wilson, 2 Economist Shaghil Ahmed, Kartik B. Athreya, Brian M. Doyle, Eric M. Engen, Carlos Garriga, Joseph W. Gruber, and Egon Zakrajšek, Associate Economists Roberto Perli, Manager, System Open Market Account Julie Ann Remache, Deputy Manager, System Open Market Account Jose Acosta, Senior System Engineer II, Division of Information Technology, Board Isaiah C. Ahn, Information Management Analyst, Division of Monetary Affairs, Board Mary L. Aiken, Senior Associate Director, Division of Supervision and Regulation, Board Gianni Amisano, Assistant Director, Division of Research and Statistics, Board Roc Armenter, Executive Vice President, Federal Reserve Bank of Philadelphia David M. Arseneau, Deputy Associate Director, Division of Financial Stability, Board Alyssa Arute, 3 Assistant Director, Division of Reserve Bank Operations and Payment Systems, Board William F. Bassett, Senior Associate Director, Division of Financial Stability, Board Michele Cavallo, Special Adviser to the Board, Division of Board Members, Board Andrew Cohen, 4 Special Adviser to the Board, Division of Board Members, Board Daniel M. Covitz, Deputy Director, Division of Research and Statistics, Board Marnie Gillis DeBoer, 3 Senior Associate Director, Division of Monetary Affairs, Board Wendy E. Dunn, Adviser, Division of Research and Statistics, Board Eric C. Engstrom, Associate Director, Division of Monetary Affairs, Board Laura J. Feiveson, 5 Special Adviser to the Board, Division of Board Members, Board Andrew Figura, Associate Director, Division of Research and Statistics, Board Glenn Follette, Associate Director, Division of Research and Statistics, Board Etienne Gagnon, Senior Associate Director, Division of International Finance, Board Jonathan Glicoes, Senior Financial Institution Policy Analyst II, Division of Monetary Affairs, Board Valerie S. Hinojosa, Section Chief, Division of Monetary Affairs, Board Jane E. Ihrig, Special Adviser to the Board, Division of Board Members, Board Margaret M. Jacobson, Senior Economist, Division of Monetary Affairs, Board Michael T. Kiley, Deputy Director, Division of Monetary Affairs, Board Don H. Kim, Senior Adviser, Division of Monetary Affairs, Board Elizabeth Klee, Deputy Director, Division of Monetary Affairs, Board Anna R. Kovner, Executive Vice President, Federal Reserve Bank of Richmond Spencer D. Krane, Senior Vice President, Federal Reserve Bank of Chicago Sylvain Leduc, Executive Vice President and Director of Economic Research, Federal Reserve Bank of San Francisco Andreas Lehnert, Director, Division of Financial Stability, Board Kurt F. Lewis, Special Adviser to the Chair, Division of Board Members, Board Logan T. Lewis, Section Chief, Division of International Finance, Board Geng Li, Assistant Director, Division of Research and Statistics, Board Laura Lipscomb, Special Adviser to the Board, Division of Board Members, Board Benjamin W. McDonough, Deputy Secretary and Ombudsman, Office of the Secretary, Board Neil Mehrotra, Assistant Vice President, Federal Reserve Bank of Minneapolis Ann E. Misback, 6 Secretary, Office of the Secretary, Board David Na, Lead Financial Institution Policy Analyst, Division of Monetary Affairs, Board Edward Nelson, Senior Adviser, Division of Monetary Affairs, Board Anna Nordstrom, Head of Markets, Federal Reserve Bank of New York Alyssa T. O'Connor, Special Adviser to the Board, Division of Board Members, Board Ekaterina Peneva, Assistant Director and Chief, Division of Research and Statistics, Board Caterina Petrucco-Littleton, Special Adviser to the Board, Division of Board Members, Board Damjan Pfajfar, Vice President, Federal Reserve Bank of Cleveland Eugenio P. Pinto, Special Adviser to the Board, Division of Board Members, Board Jordan Pollinger, 3 Associate Director, Federal Reserve Bank of New York Fabiola Ravazzolo, 3 Capital Markets Trading and Policy Advisor, Federal Reserve Bank of New York Kirk Schwarzbach, 7 Special Assistant to the Board, Division of Board Members, Board Zeynep Senyuz, Special Adviser to the Board, Division of Board Members, Board Thiago Teixeira Ferreira, Special Adviser to the Board, Division of Board Members, Board Mary H. Tian, Group Manager, Division of Monetary Affairs, Board Annette Vissing-Jørgensen, Senior Adviser, Division of Monetary Affairs, Board Jeffrey D. Walker, 3 Senior Associate Director, Division of Reserve Bank Operations and Payment Systems, Board Jonathan Willis, Vice President, Federal Reserve Bank of Atlanta Rebecca Zarutskie, Senior Vice President, Federal Reserve Bank of Dallas _______________________ Joshua Gallin Secretary 1. The Federal Open Market Committee is referenced as the "FOMC" and the "Committee" in these minutes; the Board of Governors of the Federal Reserve System is referenced as the "Board" in these minutes. Return to text 2. Attended Tuesday's session only. Return to text 3. Attended through the discussion of developments in financial markets and open market operations. Return to text 4. Attended the discussion of economic developments and the outlook. Return to text 5. Attended through the discussion of developments in financial markets and open market operations, and from the discussion of current monetary policy through the end of the meeting. Return to text 6. Attended the discussion of the review of the monetary policy framework. Return to text 7. Attended through the discussion of developments in financial markets and open market operations through the end of the meeting. Return to text

Minutes of the Federal Open Market Committee June 17–18, 2025 A joint meeting of the Federal Open Market Committee and the Board of Governors of the Federal Reserve System was held in the offices of the Board of Governors on Tuesday, June 17, 2025, at 9:00 a.m. and continued on Wednesday, June 18, 2025, at 9:00 a.m. 1 Review of Monetary Policy Strategy, Tools, and Communications Committee participants continued their discussions related to their review of the Federal Reserve's monetary policy framework, with a focus on issues related to assessing the risks and uncertainty that are relevant for monetary policy and the potential implications of these issues for the FOMC's policy strategy and communications. The staff reviewed qualitative and quantitative tools that are commonly used to measure uncertainty about the economic outlook and the balance of risks, drawing on U.S. and international experience. The staff then discussed monetary policy strategies that aim to be robust to a variety of economic environments and ways in which risk-management considerations can be incorporated into monetary policy analysis and decisionmaking. The staff also considered the role of scenario analysis as a tool to communicate to the public risks and uncertainty around the economic outlook and their implications for monetary policy. Participants noted that risks and uncertainty are important factors affecting their decisionmaking and emphasized the need for a policy strategy that aims to achieve the Committee's maximum-employment and price-stability objectives across a wide range of highly uncertain developments. Participants acknowledged that risks and uncertainty about the economy are pervasive and pose challenges to both the design and communication of monetary policy. They remarked that measuring and assessing risks and uncertainty are difficult and that the Committee has been well served by relying on a wide range of indicators, as well as information from business and community contacts, to gauge evolving risks, especially during periods of heightened uncertainty. Participants remarked that effective communications about risks and uncertainty help the public understand the Committee's decisions and enhance the transparency, accountability, and effectiveness of monetary policy decisions. Participants had a preliminary discussion about a range of issues related to enhancing the Committee's suite of communication tools, including possible changes to the Summary of Economic Projections (SEP) and a potential broader use of alternative scenarios. Participants highlighted, however, the challenges associated with adjustments to these tools and noted that any revisions to the Committee's communication policies would need to be considered carefully and receive broad support across participants. Participants agreed to continue their discussions of ways to enhance the Committee's communication tools and practices once they completed their review of their Statement on Longer-Run Goals and Monetary Policy Strategy. Participants expected that they would complete that review by late summer. Developments in Financial Markets and Open Market Operations The manager turned first to a review of financial market developments. Over the intermeeting period, policy expectations and Treasury yields rose modestly, credit spreads narrowed, and equity prices increased. Markets were attentive to the de-escalation of trade tensions; generally weaker-than-expected economic data releases, with the notable exception of the May employment report; and prospects for fiscal expansion. These factors, on net, resulted in some paring back of investors' perception of downside risk to growth and upside risk to inflation. Results from the Open Market Desk's Survey of Market Expectations were consistent with this interpretation: The median respondent's expectations for real gross domestic product (GDP) growth and personal consumption expenditures (PCE) inflation for 2025 retraced some of the moves that occurred after the April tariff announcements, though growth expectations were still materially lower and inflation expectations remained higher relative to the March survey. The median respondent's modal path for the federal funds rate in the June survey shifted higher through 2026 and implied two 25 basis point rate cuts both this year and next year. Market-based policy expectations were largely consistent with survey results, with both the futures-based average federal funds rate path and the options-based modal federal funds rate path shifting higher over the intermeeting period. Overall, the changes in the intermeeting period brought policy expectations for the next few quarters back close to where they stood at the time of the March FOMC meeting. However, futures-based policy expectations beyond the next few quarters had not fully retraced the decline seen over the previous intermeeting period, suggesting that perceived medium- and longer-term downside risks to growth remained larger than before the April tariff announcements. Nominal Treasury yields rose 15 to 20 basis points, on net, over the intermeeting period. The manager observed that the rise in shorter-maturity yields was consistent with the upward shift in the expected policy rate path. The rise in longer-maturity yields appeared to reflect, in part, market participants' increasing fiscal concerns: In response to a Desk survey question about the top factors behind the respondents' forecast of the 10-year yield over the next two years, the fiscal outlook was the factor cited by the largest number of respondents. Market-implied inflation compensation for the year ahead fell about 20 basis points over the intermeeting period, while longer-term inflation compensation measures were little changed. Liquidity conditions for nominal Treasury securities had improved as volatility declined following the stress seen in the previous intermeeting period. The events of April, and the more recent focus in markets around fiscal sustainability issues, did not appear to have affected demand for Treasury securities at auction; an index of auction performance derived from a number of metrics indicated that auction performance had improved modestly over the past several quarters and was currently in line with the longer-run average. Regarding foreign exchange developments, the broad trade-weighted dollar index fell further during the intermeeting period despite increases in U.S. equity prices and short-term Treasury yields. The manager noted that dollar depreciation continued to be consistent with larger downside revisions to the U.S. growth outlook relative to other major economies, which induced increased currency hedging flows by foreign investors in U.S. assets. The manager also remarked that the sensitivity of the foreign exchange value of the dollar to domestic economic surprises had not fundamentally changed. The available data continued to suggest stability in foreign holdings of U.S. assets. The manager turned next to money markets and Desk operations. Unsecured overnight rates remained stable over the intermeeting period. Rates in the repurchase agreement (repo) market were softer relative to the previous intermeeting period, including at the May month-end, as reductions in net Treasury bill issuance amid the ongoing debt limit situation resulted in increased demand for repo. With the softness in repo making the overnight reverse repurchase agreement (ON RRP) facility more attractive on a relative basis, usage of the ON RRP facility had been broadly stable, except for the typical spike at month-end. Since the start of the debt issuance suspension period in January, the Treasury General Account (TGA) had declined nearly $420 billion, ON RRP balances had increased about $75 billion, and reserves had increased $150 billion. Key indicators continued to suggest that reserves, which stood at nearly $3.5 trillion, were well into the abundant range. Once the debt limit was addressed, however, the TGA was likely to be rebuilt fairly quickly, which would drain liquidity from the system and result in fast declines in both ON RRP and reserve balances. The manager also discussed the trajectory of the System Open Market Account (SOMA) portfolio. Since balance sheet runoff commenced in June 2022, SOMA securities holdings had fallen almost $2-1/4 trillion. As a percentage of GDP, the portfolio had declined to close to where it had been at the start of the pandemic. The corresponding drain in Federal Reserve liabilities had largely come out of balances at the ON RRP facility, while reserve levels had been relatively little changed over that period. Respondents to the June Desk survey, on average, expected runoff to end in February of next year, a month later compared with the previous survey, with an expected size of the SOMA portfolio of $6.2 trillion, or about 20 percent of GDP. At that point, the respondents, on average, expected reserves to be at $2.9 trillion and the ON RRP balance to be low. The manager noted that, starting on June 26, the Desk will begin adding regular morning standing repo facility (SRF) operations to the existing afternoon operations. The additional operations are intended to further enhance the effectiveness of the SRF in its ability to support monetary policy implementation and smooth market functioning. By unanimous vote, the Committee ratified the Desk's domestic transactions over the intermeeting period. There were no intervention operations in foreign currencies for the System's account during the intermeeting period. Staff Review of the Economic Situation The information available at the time of the meeting indicated that consumer price inflation remained somewhat elevated. The unemployment rate continued to be low, and labor market conditions were solid. Available indicators suggested that real GDP was expanding at a solid pace in the second quarter. Total consumer price inflation—as measured by the 12-month change in the PCE price index—was estimated to have been 2.3 percent in May, based on the consumer and producer price indexes. Core PCE price inflation, which excludes changes in consumer energy prices and many consumer food prices, was 2.6 percent in May. Both total and core inflation were lower than at the beginning of the year. Survey-based measures of short-term inflation expectations remained high, although the extent of increases in recent months had varied considerably and some measures had declined somewhat in May and June. Most survey-based measures of longer-term inflation expectations had held steady. Recent data indicated that labor market conditions had remained solid. The unemployment rate was 4.2 percent in May, the same as in the previous two months. The labor force participation rate and the employment-to-population ratio moved down in May but remained near their levels since the beginning of the year. Total nonfarm payrolls increased at a solid pace in May, a little above the average monthly rate over the previous four months. The ratio of job vacancies to unemployed job seekers was unchanged at 1.0 in May. Average hourly earnings for all employees rose 3.9 percent over the 12 months ending in May, a little lower than a year earlier. Recent information suggested that real GDP was rising in the second quarter, after it had declined slightly in the previous quarter. Real private domestic final purchases—which comprises PCE and private fixed investment and which often provides a better signal than GDP of underlying economic momentum—had increased solidly in the first quarter and appeared to be expanding further in the second quarter. Indicators for consumer spending, such as retail sales and motor vehicle purchases through May, pointed to solid PCE growth in the second quarter. Business fixed investment (BFI) rose markedly in the first quarter, apparently boosted by a pull-forward of imported capital goods in anticipation of tariff increases, and incoming data suggested that BFI was rising modestly in the second quarter. International trade flows continued to be volatile amid substantial shifts in U.S. tariffs. After surging in the first quarter ahead of expected tariff hikes, U.S. imports—especially of consumer goods—declined sharply in April. That decline suggested that the front-loading of imports had stopped after the introduction of broad-based tariffs in early April. By contrast, U.S. exports firmed in April. In mid-May, the U.S. and China agreed to a 90-day reduction in bilateral tariffs, and recent indicators suggested that this change led to a rebound in trade flows. Economic growth abroad picked up in the first quarter, lifted by the surge in shipments to the U.S.—especially from Europe and Asia excluding China—in anticipation of tariff hikes. More recent indicators pointed to a slowdown in foreign economic activity in the second quarter, partly reflecting lower exports to the U.S. and the effects of elevated uncertainty about the course of global trade policies. Inflation abroad remained near central bank targets in many foreign economies, although recent data showed renewed inflationary pressures in some countries, notably in Mexico. By contrast, inflation in China remained subdued. Many foreign central banks eased policy during the intermeeting period, citing concerns about economic growth and, in some cases, further progress on restoring price stability. In their communications, foreign central banks continued to emphasize the need to maintain policy flexibility amid substantial risks and uncertainty. Staff Review of the Financial Situation Despite a weakening of near-term inflation pressures, the market-implied path of the federal funds rate over the next year increased over the intermeeting period with improvements in the economic outlook amid a general easing in trade tensions. Near-term inflation compensation declined, while longer-term inflation compensation was little changed. Nominal and real Treasury yields increased moderately, on net, across the maturity spectrum. Consistent with improving risk sentiment from recent trade developments, broad equity price indexes increased markedly, and credit spreads tightened. Credit spreads narrowed to very low levels relative to their historical distribution, except for the lowest-quality corporate bonds, which stood close to the median of their distribution. The VIX—a forward-looking measure of near-term equity market volatility—declined moderately. The reduction in trade policy tensions between the U.S. and China led to an improvement in global economic growth prospects and lifted investor risk sentiment. The military conflict between Israel and Iran left only a limited imprint outside of energy markets. On net, equity indexes and market-based policy rate expectations increased in most major foreign economies. The dollar depreciated a bit further. Conditions in U.S. short-term funding markets remained stable. After increasing over the previous intermeeting period because of incoming tax receipts, the TGA had resumed its decline in response to actions associated with the ongoing federal debt limit situation. Average usage of the ON RRP facility was little changed. Rates in secured markets were, on average, slightly below the effective federal funds rate, likely reflecting low Treasury bill supply. In domestic credit markets, borrowing costs for businesses, households, and municipalities mostly edged down but remained elevated. Yields on both corporate bonds and leveraged loans declined modestly. Interest rates on small business loans decreased in May. Yields on higher-rated tranches of commercial mortgage-backed securities (CMBS) were little changed or increased slightly, whereas yields on lower-rated CMBS tranches declined, notably so for non-agency securities. Rates on 30-year fixed-rate conforming residential mortgages were little changed and remained elevated. Interest rates on credit card offers ticked up in March and April, while rates on new auto loans were little changed in May. Financing through capital markets and nonbank lenders was readily accessible for public corporations and large and middle-market private corporations. Issuance of nonfinancial corporate bonds and leveraged loans, which slowed in April, was solid in May and early June, and private credit continued to be broadly available in April and May. Regarding bank credit, commercial and industrial loan growth picked up in April but moderated in May. Commercial real estate (CRE) loan growth was modest in April and May. Credit remained available for most households. In the residential mortgage market, credit continued to be easily available for high-credit-score borrowers but was tighter for low-credit-score borrowers despite easing slightly in May. Growth in consumer loan balances at banks was robust in April and May. Credit quality remained solid for large-to-midsize firms, municipalities, and most categories of mortgages, but delinquency rates continued to be somewhat elevated in other sectors. The credit performance of corporate bonds and leveraged loans remained stable in May. Delinquency rates on small business loans in March and April stayed above pre-pandemic levels. In the CRE market, CMBS delinquency rates remained elevated in May. Regarding household credit quality, the rate of serious delinquencies on Federal Housing Administration mortgages remained above pre-pandemic levels in April. By contrast, delinquency rates on most other mortgage loan types continued to stay near historical lows. In the first quarter, credit card and auto loan delinquency rates remained at elevated levels. Student loan delinquencies reported to credit bureaus shot up in the first quarter of the year after the expiration of the on-ramp period for student loan payments and were expected to climb further over the next few quarters. While delinquent student loan borrowers have not shown greater difficulty in meeting other debt payments so far, debt collections on defaulted student loans later this year could boost delinquency rates on other debt. Staff Economic Outlook The staff projection of real GDP growth for this year through 2027 was higher than the one prepared for the May meeting, primarily because trade policy announcements led the staff to reduce their assumptions about effective tariff rates relative to those in their previous forecast. With that improved economic outlook, labor market conditions were not expected to weaken as much as in the previous projection, though the unemployment rate was still forecast to rise somewhat through next year and to run a little above the staff's estimate of its natural rate through 2027. The staff's inflation projection was lower than the one prepared for the May meeting. Tariff increases were expected to raise inflation this year and to provide a small boost in 2026. Inflation was projected to decline to 2 percent by 2027. The staff continued to view the uncertainty around their economic outlook as elevated, primarily reflecting the uncertainty surrounding changes to trade, fiscal, immigration, and regulatory policies and the associated economic effects. In addition to the baseline forecast, the staff had prepared a number of alternative economic scenarios. The staff judged the risks around the projections of real GDP growth and employment as still skewed to the downside, though they saw the risk of a recession as less than at the time of their previous forecast. The staff continued to view the risks around the inflation forecast as skewed to the upside, as the projected rise in inflation this year could be more persistent than assumed in the baseline projection. Participants' Views on Current Conditions and the Economic Outlook In conjunction with this FOMC meeting, participants submitted their projections of the most likely outcomes for real GDP growth, the unemployment rate, and inflation for each year from 2025 through 2027 and over the longer run. The projections were based on participants' individual assessments of appropriate monetary policy, including their projections of the federal funds rate. The longer-run projections represented each participant's assessment of the rate to which each variable would tend to converge under appropriate monetary policy and in the absence of further shocks to the economy. Participants also provided their individual assessments of the level of uncertainty and the balance of risks associated with their projections. The SEP was released to the public after the meeting. Participants noted that the available data showed that economic growth was solid and the unemployment rate was low. Participants observed that inflation had come down but remained somewhat elevated. Growth in consumer spending and business investment had been solid, though many participants observed that measures of household and business sentiment remained weak. Participants judged that uncertainty about the outlook was elevated amid evolving developments in trade policy, other government policies, and geopolitical risks, but that overall uncertainty had diminished since the previous meeting. Some participants commented that high uncertainty had the potential to restrain economic activity, including private-sector hiring, in the near term. Participants judged that there were downside risks to employment and economic activity and upside risks to inflation, but that these risks had decreased as expectations about effective tariff rates and their effects had declined from levels in April. Participants observed that inflation had eased significantly since its peak in 2022 but remained somewhat elevated relative to the Committee's 2 percent longer-run goal. Participants noted that the progress in returning inflation to target had continued even though that progress had been uneven. Some participants observed that services price inflation had moved down recently, while goods price inflation had risen. A few participants noted that there had been limited progress recently in reducing core inflation. Some participants noted that geopolitical developments in the Middle East posed an upside risk to energy prices. In discussing their outlooks for inflation, participants noted that increased tariffs were likely to put upward pressure on prices. There was considerable uncertainty, however, about the timing, size, and duration of these effects. Many observed that it might take some time for the effect of higher tariffs to be reflected in the prices of final goods because firms might choose not to raise prices on affected goods and services until they had run down inventories of products imported before the increase in tariffs or because it would take some time for tariffs on intermediate goods to work through the supply chain. Several participants commented that upward pressure on prices could be greater if tariffs disrupted supply chains or acted as a drag on productivity. Many participants noted that the eventual effect of tariffs on inflation could be more limited if trade deals are reached soon, if firms are able to quickly adjust their supply chains, or if firms can use other margins of adjustment to reduce their exposure to the effects of tariffs. Several participants noted that firms not directly subject to tariffs might take the opportunity to increase their prices if other prices rise, particularly those of complementary products. Participants relayed a range of assessments from their business contacts regarding the extent to which tariff-related cost increases would be passed on to consumers. Several participants observed that the pass-through of tariffs might be limited if households and businesses exhibit a low tolerance for price hikes or if firms seek to increase their market share as others raise their prices. A few participants noted that the pass-through of tariff-related costs likely would be greater for smaller businesses or businesses with narrow profit margins. Participants noted that longer-term inflation expectations continued to be well anchored and that it was important they remain so. Several participants commented that shorter-term inflation expectations had been elevated and that this development had the potential to spill over into longer-term expectations or to affect price and wage setting in the near term. While a few participants noted that tariffs would lead to a one-time increase in prices and would not affect longer-term inflation expectations, most participants noted the risk that tariffs could have more persistent effects on inflation, and some highlighted the fact that such persistence could also affect inflation expectations. Some participants observed that because inflation has been elevated for some time, there was a heightened risk of longer-term inflation expectations becoming unanchored if there is a long-lasting rise in inflation. In their discussion of the labor market, participants judged that conditions remained solid and that the labor market was at, or near, estimates of maximum employment. Several participants observed that the recent stability of the labor market reflected a slowing in both hiring and layoffs, and several participants also mentioned that their contacts and business survey respondents reported pausing hiring decisions because of elevated uncertainty. Several participants noted that immigration policies were reducing labor supply. In their outlook for the labor market, most participants suggested that higher tariffs or heightened policy uncertainty would weigh on labor demand, and many participants expected a gradual softening of conditions. A few participants noted that some indicators already provided signs of softness and that they would be attentive to indications of further labor market weakening. Some participants observed that wage growth had continued to moderate and that it was not expected to contribute to inflationary pressures. Participants judged that economic activity had continued to grow at a solid pace, although uncertainty remained elevated. The outlook was for continued economic growth, although a majority of participants expected that the pace of growth was likely to moderate going forward. Regarding the household sector, several participants observed that some recent data indicated continued solid consumer spending growth, whereas several other participants pointed to other data that suggested softening. Several participants noted that lower- and moderate-income households were switching to lower-cost items and brands or that these households could be disproportionately affected by tariff-related price increases. Many participants observed that measures of household sentiment remained low, although these measures had risen a bit recently. A few participants noted that consumer sentiment had not been a good predictor of consumer spending in recent years. In their discussion of the business sector, participants noted that activity remained solid, although there have been signs of softening, and many observed that indicators of business sentiment remained low. With respect to investment spending, several participants reported that business contacts had indicated that their firms were proceeding with existing investment projects but that heightened uncertainty was making them cautious about beginning new projects, especially larger ones; some smaller new investments or those with more certain payoffs were still being undertaken. Several participants noted that financing from both banks and financial markets was readily available for larger investment projects. A couple of participants noted that business investment in artificial intelligence could boost productivity. Several participants commented that there had been signs of softening production activity in the manufacturing sector and pointed to reductions in orders and shipments in manufacturing surveys or in reports of business contacts. A couple of participants noted that the agricultural sector faced strains from low crop prices and high input costs. In their consideration of monetary policy at this meeting, participants noted that inflation remained somewhat elevated. Participants also observed that recent indicators suggested that economic activity had continued to expand at a solid pace, although swings in net exports and inventories had affected the measurement and interpretation of the data. Participants further noted that the unemployment rate remained at a low level and that labor market conditions had remained solid. Participants observed that uncertainty about the economic outlook had diminished amid a reduction in announced and expected tariffs, which appeared to peak in April and had subsequently declined, but that overall uncertainty continued to be elevated. All participants viewed it as appropriate to maintain the target range for the federal funds rate at 4-1/4 to 4-1/2 percent. Participants judged it appropriate to continue the process of reducing the Federal Reserve's securities holdings. In considering the outlook for monetary policy, participants generally agreed that, with economic growth and the labor market still solid and current monetary policy moderately or modestly restrictive, the Committee was well positioned to wait for more clarity on the outlook for inflation and economic activity. Participants noted that monetary policy would be informed by a wide range of incoming data, the economic outlook, and the balance of risks. Most participants assessed that some reduction in the target range for the federal funds rate this year would likely be appropriate, noting that upward pressure on inflation from tariffs may be temporary or modest, that medium- and longer-term inflation expectations had remained well anchored, or that some weakening of economic activity and labor market conditions could occur. A couple of participants noted that, if the data evolve in line with their expectations, they would be open to considering a reduction in the target range for the policy rate as soon as at the next meeting. Some participants saw the most likely appropriate path of monetary policy as involving no reductions in the target range for the federal funds rate this year, noting that recent inflation readings had continued to exceed the Committee's 2 percent goal, that upside risks to inflation remained meaningful in light of factors such as elevated short-term inflation expectations of businesses and households, or that they expected that the economy would remain resilient. Several participants commented that the current target range for the federal funds rate may not be far above its neutral level. Various participants discussed risks that, if realized, would have the potential to affect the appropriate path of monetary policy. Regarding upside risks to inflation, participants noted that, if the imposition of tariffs were to generate a larger-than-expected increase in inflation, if such an increase in inflation were to be more persistent than anticipated, or if a notable increase in medium- or longer-term inflation expectations were to occur, then it would be appropriate to maintain a more restrictive stance of monetary policy than would otherwise be the case, especially if labor market conditions and economic activity remained solid. By contrast, if labor market conditions or economic activity were to weaken materially, or if inflation were to continue to come down and inflation expectations remained well anchored, then it would be appropriate to establish a less restrictive stance of monetary policy than would otherwise be the case. Participants noted that the Committee might face difficult tradeoffs if elevated inflation proved to be more persistent while the outlook for employment weakened. If that were to occur, participants agreed that they would consider how far the economy is from each goal and the potentially different time horizons over which those respective gaps would be anticipated to close. In considering the likelihood of various scenarios, participants agreed that the risks of higher inflation and weaker labor market conditions had diminished but remained elevated, citing a lower expected path of tariffs, encouraging recent readings on inflation and inflation expectations, resilience in consumer and business spending, or improvements in some measures of consumer or business sentiment. Some participants commented that they saw the risk of elevated inflation as remaining more prominent, or as having diminished by less, than risks to employment. A few participants saw risks to the labor market as having become predominant. They noted some recent signs of weakening in real activity or the labor market, or commented that conditions could weaken in the future, particularly if policy were to remain restrictive. Participants agreed that although uncertainty about inflation and the economic outlook had decreased, it remained appropriate to take a careful approach in adjusting monetary policy. Participants emphasized the importance of ensuring that longer-term inflation expectations remained well anchored and agreed that the current stance of monetary policy positioned the Committee well to respond in a timely way to potential economic developments. Committee Policy Actions In their discussions of monetary policy for this meeting, members agreed that although swings in net exports had affected the data, recent indicators suggested that economic activity had continued to expand at a solid pace. Members agreed that the unemployment rate had remained at a low level and that labor market conditions had remained solid. Members concurred that inflation remained somewhat elevated. Members agreed that it was appropriate to acknowledge in the postmeeting statement that uncertainty about the economic outlook had diminished but remained elevated, and the Committee was attentive to the risks to both sides of its dual mandate. The assessment that uncertainty had declined reflected, in part, a reduction in the expected level of tariffs, which appeared to peak in April and had subsequently declined. In support of its goals, the Committee agreed to maintain the target range for the federal funds rate at 4-1/4 to 4-1/2 percent. Members agreed that, in considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee would carefully assess incoming data, the evolving outlook, and the balance of risks. All members agreed that the postmeeting statement should affirm their strong commitment both to supporting maximum employment and to returning inflation to the Committee's 2 percent objective. Members agreed that, in assessing the appropriate stance of monetary policy, the Committee would continue to monitor the implications of incoming information for the economic outlook. They would be prepared to adjust the stance of monetary policy as appropriate if risks emerged that could impede the attainment of the Committee's goals. Members also agreed that their assessments would take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments. At the conclusion of the discussion, the Committee voted to direct the Federal Reserve Bank of New York, until instructed otherwise, to execute transactions in the SOMA in accordance with the following domestic policy directive, for release at 2:00 p.m.: "Effective June 20, 2025, the Federal Open Market Committee directs the Desk to: Undertake open market operations as necessary to maintain the federal funds rate in a target range of 4-1/4 to 4-1/2 percent. Conduct standing overnight repurchase agreement operations with a minimum bid rate of 4.5 percent and with an aggregate operation limit of $500 billion. Conduct standing overnight reverse repurchase agreement operations at an offering rate of 4.25 percent and with a per-counterparty limit of $160 billion per day. Roll over at auction the amount of principal payments from the Federal Reserve's holdings of Treasury securities maturing in each calendar month that exceeds a cap of $5 billion per month. Redeem Treasury coupon securities up to this monthly cap and Treasury bills to the extent that coupon principal payments are less than the monthly cap. Reinvest the amount of principal payments from the Federal Reserve's holdings of agency debt and agency mortgage-backed securities (MBS) received in each calendar month that exceeds a cap of $35 billion per month into Treasury securities to roughly match the maturity composition of Treasury securities outstanding. Allow modest deviations from stated amounts for reinvestments, if needed for operational reasons." The vote also encompassed approval of the statement below for release at 2:00 p.m.: "Although swings in net exports have affected the data, recent indicators suggest that economic activity has continued to expand at a solid pace. The unemployment rate remains low, and labor market conditions remain solid. Inflation remains somewhat elevated. The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty about the economic outlook has diminished but remains elevated. The Committee is attentive to the risks to both sides of its dual mandate. In support of its goals, the Committee decided to maintain the target range for the federal funds rate at 4-1/4 to 4-1/2 percent. In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage‑backed securities. The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective. In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals. The Committee's assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments." Voting for this action: Jerome H. Powell, John C. Williams, Michael S. Barr, Michelle W. Bowman, Susan M. Collins, Lisa D. Cook, Austan D. Goolsbee, Philip N. Jefferson, Adriana D. Kugler, Alberto G. Musalem, Jeffrey R. Schmid, and Christopher J. Waller. Voting against this action: None. Consistent with the Committee's decision to leave the target range for the federal funds rate unchanged, the Board of Governors of the Federal Reserve System voted unanimously to maintain the interest rate paid on reserve balances at 4.4 percent, effective June 20, 2025. The Board of Governors of the Federal Reserve System voted unanimously to approve the establishment of the primary credit rate at the existing level of 4.5 percent. It was agreed that the next meeting of the Committee would be held on Tuesday–Wednesday, July 29–30, 2025. The meeting adjourned at 10:10 a.m. on June 18, 2025. Notation Vote By notation vote completed on May 27, 2025, the Committee unanimously approved the minutes of the Committee meeting held on May 6–7, 2025. Attendance Jerome H. Powell, Chair John C. Williams, Vice Chair Michael S. Barr Michelle W. Bowman Susan M. Collins Lisa D. Cook Austan D. Goolsbee Philip N. Jefferson Adriana D. Kugler Alberto G. Musalem Jeffrey R. Schmid Christopher J. Waller Beth M. Hammack, Patrick Harker, Neel Kashkari, and Lorie K. Logan, Alternate Members of the Committee Thomas I. Barkin, Raphael W. Bostic, and Mary C. Daly, Presidents of the Federal Reserve Banks of Richmond, Atlanta, and San Francisco, respectively Joshua Gallin, Secretary Matthew M. Luecke, Deputy Secretary Brian J. Bonis, Assistant Secretary Michelle A. Smith, Assistant Secretary Mark E. Van Der Weide, General Counsel Richard Ostrander, Deputy General Counsel Trevor A. Reeve, Economist Stacey Tevlin, Economist Beth Anne Wilson, Economist Shaghil Ahmed, Brian M. Doyle, Eric M. Engen, Joseph W. Gruber, Anna Paulson, and Egon Zakrajšek, Associate Economists Roberto Perli, Manager, System Open Market Account Julie Ann Remache, Deputy Manager, System Open Market Account Jose Acosta, Senior System Engineer II, Division of Information Technology, Board Sriya Anbil, Group Manager, Division of Monetary Affairs, Board Philippe Andrade, 2 Vice President, Federal Reserve Bank of Boston Roc Armenter, Executive Vice President, Federal Reserve Bank of Philadelphia Alyssa Arute, 3 Assistant Director, Division of Reserve Bank Operations and Payment Systems, Board Ayelen Banegas, Principal Economist, Division of Monetary Affairs, Board Becky C. Bareford, First Vice President, Federal Reserve Bank of Richmond Lisa Barrow, Vice President, Federal Reserve Bank of Cleveland William F. Bassett, Senior Associate Director, Division of Financial Stability, Board Michael Bauer, 2 Senior Research Advisor, Federal Reserve Bank of San Francisco Travis J. Berge, 2 Section Chief, Division of Research and Statistics, Board Dario Caldara, 2 Adviser, Division of International Finance, Board Mark A. Carlson, Adviser, Division of Monetary Affairs, Board Michele Cavallo, Special Adviser to the Board, Division of Board Members, Board Wendy E. Dunn, Adviser, Division of Research and Statistics, Board William Dupor, Senior Economic Policy Advisor II, Federal Reserve Bank of St. Louis Eric C. Engstrom, Associate Director, Division of Monetary Affairs, Board Giovanni Favara, 2 Deputy Associate Director, Division of Monetary Affairs, Board Laura J. Feiveson, Special Adviser to the Board, Division of Board Members, Board Giuseppe Fiori, 2 Principal Economist, Division of International Finance, Board Jonas Fisher, 2 Senior Vice President, Federal Reserve Bank of Chicago Glenn Follette, Associate Director, Division of Research and Statistics, Board Etienne Gagnon, Senior Associate Director, Division of International Finance, Board Vaishali Garga, 2 Principal Economist, Federal Reserve Bank of Boston Michael S. Gibson, Director, Division of Supervision and Regulation, Board Jonathan E. Goldberg, Principal Economist, Division of Monetary Affairs, Board François Gourio, Senior Economist and Economic Advisor, Federal Reserve Bank of Chicago Christopher J. Gust, Associate Director, Division of Monetary Affairs, Board François Henriquez, First Vice President, Federal Reserve Bank of St. Louis Edward Herbst, 2 Section Chief, Division of Monetary Affairs, Board Valerie S. Hinojosa, Section Chief, Division of Monetary Affairs, Board Sara J. Hogan, 3 Senior Financial Institution Policy Analyst I, Division of Reserve Bank Operations and Payment Systems, Board Jane E. Ihrig, Special Adviser to the Board, Division of Board Members, Board Benjamin K. Johannsen, 2 Assistant Director, Division of Monetary Affairs, Board Michael T. Kiley, Deputy Director, Division of Monetary Affairs, Board Don H. Kim, Senior Adviser, Division of Monetary Affairs, Board Elizabeth Klee, Deputy Director, Division of Monetary Affairs, Board Scott R. Konzem, Senior Economic Modeler II, Division of Monetary Affairs, Board Michael Koslow, 3 Associate Director, Federal Reserve Bank of New York Spencer D. Krane, 2 Senior Vice President, Federal Reserve Bank of Chicago Sylvain Leduc, Executive Vice President and Director of Economic Research, Federal Reserve Bank of San Francisco Andreas Lehnert, Director, Division of Financial Stability, Board Paul Lengermann, Deputy Associate Director, Division of Research and Statistics, Board Eric LeSueur, 3 Policy and Market Analysis Advisor, Federal Reserve Bank of New York Kurt F. Lewis, Special Adviser to the Chair, Division of Board Members, Board Logan T. Lewis, Section Chief, Division of International Finance, Board Laura Lipscomb, Special Adviser to the Board, Division of Board Members, Board Francesca Loria, 2 Principal Economist, Division of Monetary Affairs, Board David López-Salido, Senior Associate Director, Division of Monetary Affairs, Board Jonathan P. McCarthy, Economic Research Advisor, Federal Reserve Bank of New York Benjamin W. McDonough, Deputy Secretary and Ombudsman, Office of the Secretary, Board Alisdair G. McKay, 2 Monetary Advisor, Federal Reserve Bank of Minneapolis Yvette McKnight, 2 Senior Agenda Assistant, Office of the Secretary, Board Mark Meder, First Vice President, Federal Reserve Bank of Cleveland Ann E. Misback, Secretary, Office of the Secretary, Board David Na, Lead Financial Institution Policy Analyst, Division of Monetary Affairs, Board Edward Nelson, Senior Adviser, Division of Monetary Affairs, Board Giovanni Nicolò, 2 Principal Economist, Division of Monetary Affairs, Board Anna Nordstrom, Head of Markets, Federal Reserve Bank of New York Alyssa T. O'Connor, Special Adviser to the Board, Division of Board Members, Board Michael G. Palumbo, Senior Associate Director, Division of Research and Statistics, Board Matthias Paustian, 2 Assistant Director, Division of Research and Statistics, Board Karen M. Pence, Deputy Associate Director, Division of Research and Statistics, Board Paolo A. Pesenti, 4 Director of Monetary Policy Research, Federal Reserve Bank of New York Eugenio P. Pinto, Special Adviser to the Board, Division of Board Members, Board Andrea Raffo, Senior Vice President, Federal Reserve Bank of Minneapolis Samuel Schulhofer-Wohl, Senior Vice President, Federal Reserve Bank of Dallas Kirk Schwarzbach, Special Assistant to the Board, Division of Board Members, Board Zeynep Senyuz, Special Adviser to the Board, Division of Board Members, Board Andre F. Silva, Principal Economist, Division of Monetary Affairs, Board Thiago Teixeira Ferreira, Special Adviser to the Board, Division of Board Members, Board Judit Temesvary, Principal Economist, Division of International Finance, Board Paula Tkac, Director of Research, Federal Reserve Bank of Atlanta Robert L. Triplett III, First Vice President, Federal Reserve Bank of Dallas Daniel J. Vine, Principal Economist, Division of Research and Statistics, Board Donielle A. Winford, Senior Information Manager, Division of Monetary Affairs, Board Alexander L. Wolman, Vice President, Federal Reserve Bank of Richmond Rebecca Zarutskie, 2 Senior Vice President, Federal Reserve Bank of Dallas Molin Zhong, 2 Principal Economist, Division of Financial Stability, Board _______________________ Joshua Gallin Secretary 1. The Federal Open Market Committee is referenced as the "FOMC" and the "Committee" in these minutes; the Board of Governors of the Federal Reserve System is referenced as the "Board" in these minutes. Return to text 2. Attended through the discussion of the review of the monetary policy framework. Return to text 3. Attended through the discussion of developments in financial markets and open market operations. Return to text 4. Attended through the discussion of economic developments and the outlook. Return to text