U.S. Stocks Rise as Fed Minutes Show Split on Inflation Path

On the evening of July 10, Beijing time, U.S. stocks maintained their upward momentum. The minutes from the Federal Reserve's June monetary policy meeting revealed a split within the Fed into three camps. Investors closely monitored the latest developments in the trade situation after the threat of significantly increasing import tariffs on copper and pharmaceuticals.

The Dow Jones Industrial Average rose 184.14 points, or 0.42%, to 44,424.90. The Nasdaq Composite Index gained 159.75 points, or 0.78%, to 20,578.21. The S&P 500 Index increased by 29.64 points, or 0.48%, to 6,255.16.

During the early trading session on Wednesday, the Nasdaq briefly surged to 20,645.41, hitting an intraday record high.

The minutes from the Federal Reserve's June meeting reflected disagreements among members regarding the future path of inflation. The minutes indicated that while considering the outlook for monetary policy, participants generally agreed that, given the continued strength of economic growth and the labor market, the current monetary policy might have some restrictive effects. The committee believed it had the ability to wait for clearer prospects for inflation and economic activity.

Some participants noted that if data developments aligned with their expectations, they would be willing to consider lowering the target range for the policy rate at the next meeting. Some participants believed the most appropriate path for monetary policy this year would be to keep the federal funds rate target range unchanged, citing recent inflation data that continued to exceed the committee's 2% target.

Several participants commented that the current target range for the federal funds rate might not be much higher than the neutral level. The minutes also highlighted that staff at the Fed had noted during the previous meeting that easing trade tensions and improving global economic growth prospects had boosted investor risk appetite. The military conflict between Israel and Iran had limited impact beyond the energy market. Market-implied federal funds rate paths had risen during the intermeeting period.

The minutes also indicated that staff at the Fed had noted during the previous meeting that the increase in tariffs was expected to push up inflation this year and give a slight boost to inflation in 2026. Inflation was projected to fall to 2% by 2027. Staff continued to view the risks around inflation forecasts as tilted to the upside, as the increase in inflation this year might be more persistent than assumed in the baseline projection. Uncertainty around the economic outlook had increased, primarily reflecting uncertainty around changes in trade, fiscal, immigration, and regulatory policies and their related economic impacts.

Analysts pointed out that the minutes from the June Fed meeting reflected intense discussions about the future path of inflation, with significant uncertainty surrounding price trends. Some members continued to express concerns about the inflation outlook, arguing that higher tariffs could disrupt supply chains, drag down productivity, and through higher medium- to long-term inflation expectations, trigger a vicious cycle.

Another group of members took a relatively optimistic stance, pointing out that trade agreements and proactive adjustments to supply chains could mitigate the impact. The minutes specifically mentioned that "participants reported a series of assessments from business contacts regarding the extent to which tariff-related costs were passed on to consumers." In summary, opinions were divided, and no clear consensus was reached.

On Tuesday, the threatened to significantly increase import tariffs on copper and pharmaceuticals, stating that there would be no further delays. The new tariff rates, ranging from 25% to 40%, were scheduled to take effect on August 1. The also announced a 50% tariff on imported copper and hinted at additional tariffs on specific industries. In the afternoon, he threatened to impose a maximum 200% tariff on imported pharmaceuticals but indicated that implementation would be delayed by approximately one to one and a half years.

Following the threat of new tariffs on copper, U.S. copper futures surged by more than 10%, reaching a historic high. Copper is crucial in electric vehicles, military applications, power grids, and numerous consumer products.

As the deadline for the 's tariffs was extended from July 9 to August 1, investors hoped for more flexibility and room for negotiation. However, the stated that there would be no further delays. Analysts noted that the changing tariff announcements from the 's administration reminded the market that risks remained. The White House had not yet achieved its goals in the trade sector, which could continue to cause market volatility.

Analysts also noted that the 's tariffs seemed to have lost their ability to shock the market. The delay in tariffs by the U.S. reduced the likelihood of sudden tariff imposition and strengthened the belief that the was genuinely committed to reaching a trade agreement. However, uncertainty remained a source of fear. The delay in tariffs did not provide any relief to companies trying to keep up with the 's tariff changes. Many executives believed that the rapidly changing tariff situation had paralyzed decision-making, and they were adjusting their supply chains and cost structures to avoid tariff-induced price increases.

On Wednesday, the European Commission President stated that the European Union was closely cooperating with the 's government to reach a trade agreement but was also preparing for various scenarios. The indicated that he might send a letter to the European Union within two days, specifying the tariff rates for goods exported to the U.S. He also mentioned that the European Union had been very friendly in recent trade negotiations. Media reports on Wednesday suggested that European Union negotiators were close to reaching a trade agreement with the , with tariff levels higher than those granted to the United Kingdom.

Analysts noted that while a letter might be sent, market hopes and negotiation signals indicated a willingness to find common ground. However, it was unclear what the final terms would be, so further observation of the negotiations in the coming days was necessary.