Fed's discount rate meeting minutes: Businesses are preparing staff reductions if costs rise

The Federal Reserve's (Fed) discount rate meeting minutes from April 7, 28, and May 8 revealed that policymakers are increasingly uneasy about looming economic impacts, mostly from US trade policy. Despite overall steady economic conditions, tariff uncertainty is continuing to weigh heavily on business operators, who are preparing backup plans and slowing their pace of investment and spending.

Key highlights

Overall, Reserve Bank directors noted considerable uncertainty about the outlook.

While most directors described recent economic conditions as generally stable, they also expressed concern about the potential impact of evolving trade and other policies on economic activity, prices, and employment.

In light of elevated uncertainty, many directors had observed consumers and businesses becoming more cautious about their spending and future plans.

Several directors commented on the expected price pressures related to tariffs, including higher prices for consumers.

Labor market conditions remained healthy, with some directors noting low turnover and limited layoffs.

Some directors said businesses in their districts had indicated future staff reductions might be needed to absorb costs associated with tariffs and reduced government funding in certain sectors.