Federal Reserve minutes for July meeting: Focusing on economic resilience, inflation pressures, and financial vulnerability.

1. Financial market dynamics and open market operations: 1. The target range for the federal funds rate may not be far from the neutral level. Actual GDP forecasts for 2025 to 2027 are similar to those prepared for the June meeting. 2. Almost all participants of the July FOMC meeting believe that maintaining the benchmark rate in the range of 4.25% to 4.50% is appropriate. 3. Tariffs have had a more noticeable impact on commodity prices, but their overall impact on the economy and inflation is still to be observed. 4. The market believes that the overall US economy remains resilient, but financial markets seem to be starting to differentiate individual companies based on their earnings scale and quality. 5. Existing data continues to show relative stability of foreign holdings of US assets. 6. Reserves remain ample. 2. Assessment of economic conditions: 1. The actual GDP growth rate in the first half of this year was moderate. The unemployment rate remains low, and consumer price inflation is still slightly high. 2. Inflation seems to have stagnated, with tariffs putting upward pressure on commodity price inflation. 3. The labor market conditions remain robust. 3. Assessment of financial conditions: 1. The US financial system remains "significantly" fragile. Asset valuation pressures are judged to be high. 2. Vulnerability related to non-financial corporate and household debt is described as "moderate". The ratio of household debt to GDP is at its lowest level in the past 20 years, and household balance sheets remain robust. 3. The debt repayment capability of listed companies remains strong. 4. Economic outlook: 1. Expected commodity price increases to be smaller than previously expected, and to occur later. In addition, the financial conditions are expected to provide slightly stronger support for output growth. 2. The labor market is expected to weaken, with the unemployment rate expected to rise above the estimated natural rate of unemployment by the end of this year and remain above the natural rate of unemployment until 2027. 3. Tariffs are expected to push up inflation this year, and provide further upward pressure on inflation in 2026; inflation is then expected to fall to 2% in 2027. 4. Uncertainty is high, mainly reflecting uncertainty about economic policy changes and their related economic impacts. 5. Views on the current economic situation and economic outlook: 1. Overall inflation remains slightly above the long-term target of 2%. Excluding the effects of tariffs, inflation is close to the target. 2. Short-term inflation is expected to rise, and the impact of tariffs still presents significant uncertainty, which may take some time to manifest in prices. 3. Current demand conditions limit the ability of businesses to pass on tariff costs to prices. 4. Long-term inflation expectations continue to remain stable. 5. The unemployment rate remains low, with employment at or near the estimated maximum employment level. 6. Economic activity growth is expected to remain low in the second half of this year. Housing demand is weakening, housing inventory is increasing, and housing prices are falling. 7. Uncertainty about the economic outlook remains high, emphasizing the risks of upward inflation and downward employment. 8. Concerns about the vulnerability of the US Treasury market, stablecoins may increase demand for US debt.