Goldman Sachs expects today’s release of the June FOMC minutes to provide valuable insights into the split in the 2025 rate outlook and more detail on the Fed’s upcoming monetary policy framework review.
Key Points:
Split on rate cuts• The June dot plot showed a narrow 10–9 majority favoring two rate cuts in 2025.• The minutes may clarify what conditions would prompt a shift — specifically, what data or developments would convince the majority to start cutting this year.
Framework review insights• Goldman expects the minutes to add context to the Fed’s internal discussion about its framework strategy.• The May minutes signaled that the Fed will likely return to flexible inflation targeting (FIT) as its primary approach — moving away from the flexible average inflation targeting (FAIT) adopted in 2020.• However, the Fed is expected to keep the option of a make-up strategy for times when rates hit the zero lower bound.
Guidance for markets• Any signals on how the Committee is weighing incoming inflation, tariffs, and labor market data will help markets assess the probability of a cut this year.• Clarity on the framework review will shape longer-term expectations about how the Fed will react to inflation overshoots or undershoots in the next cycle.
Conclusion:
Goldman Sachs sees the minutes as an opportunity to better understand the narrow divide within the Committee, the near-term reaction function for cuts, and how the Fed might refine its framework — all of which are crucial for markets pricing the path of rates into 2025 and beyond.
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