Federal Reserve Meeting Minutes: Inflation and Unemployment Risks Increased as of May Meeting

The recently released minutes of the Federal Reserve's May meeting reveal that Fed staff acknowledged at the last meeting that they might face "difficult trade-offs" in the coming months, with both rising inflation and rising unemployment. Fed officials' increased estimates of recession risks support this outlook. The simultaneous rise in inflation and unemployment will force committee members to decide whether to prioritize tightening monetary policy to combat inflation or to support economic growth and employment through interest rate cuts. As the economy adapts to the higher import tariffs proposed by the Trump administration, "almost all participants indicated that inflation might be more persistent than expected." The Fed expects that due to the impact of tariffs, this year's inflation rate will "significantly" rise, while the job market is "expected to weaken significantly," with the unemployment rate rising above the long-term expected level of full employment by the end of the year and remaining at that level for two years.