03:18 PM EDT, 07/09/2025 (MT Newswires) -- Federal Reserve officials are concerned that the Trump administration's international trade policies may fuel inflation and complicate the path to interest rate cuts, according to minutes from the June 17-18 Federal Open Market Committee (FOMC) meeting released Wednesday.

In discussing inflation risks, FOMC members noted that increased tariffs were likely to exert upward pressure on prices. "There was considerable uncertainty, however, about the timing, size, and duration of these effects," the minutes stated. "Many observed that it might take some time for the effect of higher tariffs to be reflected in the prices of final goods."

Officials acknowledged that inflation had eased significantly since its 2022 peak but remained "somewhat elevated" relative to the Fed's 2% target. Some participants cited rising goods prices and energy-related risks, while noting that service price inflation had recently declined.

Policymakers said that future rate decisions would be guided by 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," the minutes said, adding that tariff-driven inflation may be "temporary or modest."

In the June meeting, Governors Christopher Waller and Michelle Bowman were reportedly open to a rate cut as early as the July meeting. Seven members projected no cuts in 2025, up from four in March, while others leaned toward one or two reductions later in the year, depending on inflation and labor market trends.

As of Wednesday afternoon, the CME Group's FedWatch Tool showed a 44% probability of two rate cuts by December, compared with 31% for three.