Fed Minutes to offer clues on rate cut possibility amid uncertain tariff landscape

• The Minutes of the Fed's July 29-30 policy meeting will be published on Wednesday.
• Details surrounding the discussions on the decision to keep policy unchanged will be scrutinized by investors.
• Markets widely expect the Fed to opt for a 25 bps rate cut in September. 

The Minutes of the United States (US) Federal Reserve's (Fed) July 29-30 monetary policy meeting will be published on Wednesday at 18:00 GMT. The US central bank decided to maintain the policy rate in the range of 4.25%-4.5% at this meeting, but Fed Governors Christopher Waller and Michelle Bowman dissented, preferring to lower the fed funds rate by a quarter of a percentage point.

Jerome Powell and company decided to hold policy settings unchanged at July meeting

The Federal Open Market Committee (FOMC) decided to keep the interest rate unchanged at the July meeting. In the policy statement, the Fed reiterated that inflation was still "somewhat elevated," while pointing out that recent indicators suggested growth of economic activity moderated in the first half of 2025.

In a statement published a few days after the July meeting, Fed Governor Waller explained that he dissented because he saw tariffs as a one-time price event that policymakers should "look through" as long as inflation expectations remain anchored. Similarly, Fed Governor Bowman argued that slowing growth and a less dynamic labor market make it appropriate to begin gradually moving the moderately restrictive policy stance toward a neutral setting. She added that they should start putting more weight on risks to the employment mandate.

Meanwhile, the data that were released after the meeting painted a mixed picture. Nonfarm Payrolls (NFP) in the US rose by 73,000 in July, but NFP increases for May and June were revised down by 125,000 and 133,000, respectively. Recently, the US Bureau of Labor Statistics reported that annual inflation, as measured by the change in Consumer Price Index (CPI), remained unchanged at 2.7% in July. On a more concerning note, the Producer Price Index (PPI) rose by 3.3% on a yearly basis, up sharply from the 2.4% increase recorded in June.

When will FOMC Minutes be released and how could it affect the US Dollar?

The FOMC will release the Minutes of the July 29-30 policy meeting at 18:00 GMT on Wednesday. 

According to the CME FedWatch Tool, markets are currently pricing in about an 83% probability of a 25-basis-point (bps) rate cut at the next meeting. This market positioning suggests that the US Dollar (USD) could weaken against its rivals with immediate reaction, in case the publication shows that policymakers are willing to ease the policy rate in September. On the other hand, the USD could hold its ground if the discussions highlight that most Fed officials remain reluctant to lower rates, given the uncertainty surrounding the impact of tariffs on the inflation outlook.

Nevertheless, the market reaction to the FOMC Minutes could remain short-lived because the meeting took place before the latest employment and inflation data releases. Moreover, investors could opt to wait for Fed Chair Jerome Powell's speech at the Jackson Hole Symposium before taking large positions on the Fed's possible policy outlook. 

Eren Sengezer, European Session Lead Analyst at FXStreet, shares a brief outlook for the USD Index:

"The Relative Strength Index (RSI) indicator on the daily chart stays slightly below 50 and the US Dollar (USD) Index fluctuates at around the 20-day and the 50-day Simple Moving Averages (SMAs), reflecting a neutral stance in the near term.

"On the upside, the 100-day SMA aligns as a key resistance level at 99.00 ahead of 99.80-100.00 (Fibonacci 23.6% retracement of the January-July downtrend, psychological level) and 101.65 (Fibonacci 38.2% retracement). Looking south, support levels could be spotted at 97.50 (static level), 96.50 (end-point of the downtrend) and 95.50 (mid-point of the descending regression channel)."