Fed Officials Warn of Rising Recession Risks Amid Persistent Inflation

Federal Reserve officials have signaled growing concerns about recession risks as inflation remains stubbornly high. While the central bank opted to maintain interest rates at 4.25%-4.5%, internal discussions revealed deepening anxiety over the trade-offs between inflation control and employment stability.

Trade policy volatility—particularly U.S.-China tensions and new tariffs—was cited as an unquantified inflationary catalyst. "Uncertainty about the economic outlook had increased further," the minutes stated, with policymakers adopting a wait-and-see stance toward government policy impacts.

The Fed acknowledged a "solid" labor market but warned of mounting dual risks: sluggish disinflation and potential weakening in employment data. This comes as consumer spending shows early signs of strain, though the minutes stopped short of forecasting an immediate policy shift.