Current financial markets are experiencing turbulent changes, with the Federal Reserve's monetary policy direction affecting global investors' nerves. The latest July monetary policy meeting minutes released clear "hawkish" signals, triggering widespread market attention.

According to the Fed's July 29-30 meeting minutes released on Wednesday local time, despite signs of economic slowdown in the United States and weakening trends in the labor market, the vast majority of Fed officials still view upward inflation risks as the primary challenge facing current monetary policy. At this meeting, the Federal Open Market Committee (FOMC) voted 9-2 to maintain interest rates unchanged in the 4.25%-4.5% range. Notably, Fed Vice Chair for Supervision Michelle Bowman and Governor Christopher Waller voted against maintaining the benchmark rate unchanged, instead supporting a 25 basis point rate cut to prevent further labor market weakening. This marks the first time since 1993 that two voting Fed officials cast dissenting votes against maintaining rates unchanged.

The minutes showed that "most participants continued to see significant upside risks to inflation" and emphasized they would not hastily turn toward accommodation before obtaining clear evidence of inflation sustainably moving toward the target. Participants debated whether tariffs would bring a one-time price shock or a more persistent inflationary impact. "Several participants emphasized that inflation remaining above 2% for an extended period, particularly when tariff-driven inflation effects become persistent, increases the risk of inflation expectations becoming unanchored," the meeting minutes stated. Many officials also noted that the full impact of tariffs might take time to be fully reflected in consumer goods and services prices. While some officials believed newly implemented tariff policies would only bring one-time price shocks and should not be a reason to delay rate cuts, more policymakers worried about their potential impact on inflation expectations, especially as services price stickiness remains strong and core services inflation excluding housing has not shown significant decline.

Meanwhile, external political pressure continues to intensify. Trump has repeatedly called publicly for significant rate cuts and pressured Fed Chair Powell. However, Powell and most of his colleagues maintain a "data-dependent" stance, emphasizing policy independence. Markets widely expect the September 17-18 FOMC meeting could be a key turning point for policy, but if inflation data rebounds again, the Fed may still choose to "stand pat."

For financial markets, this hawkish stance means the situation of elevated short-term rates may continue, with U.S. stock valuation pressures persisting, especially high-growth, high-valuation technology stocks potentially facing increased volatility risks. The dollar index may gain support from interest rate advantages, while non-dollar currencies and gold face limited upside potential. For investors, before the Fed clearly signals rate cuts, caution is needed, with attention on key data releases including inflation and employment.

The Fed meeting minutes show participants' concerns about U.S. Treasury market vulnerabilities. According to the Federal Open Market Committee (FOMC) July 29-30 meeting minutes, several participants pointed out vulnerabilities in the U.S. Treasury market, expressing concerns about dealer intermediation capacity, rising hedge fund participation levels, and vulnerabilities from insufficient market depth. Regarding banking, two participants noted that while regulatory capital levels remain sound, some institutions may still face risks from prolonged yield increases and related unrealized losses on bank assets. Two participants also discussed foreign exchange swaps, noting these instruments are "a critical dollar funding source for foreign financial institutions providing dollar loans to their U.S. and overseas customers," but also have vulnerabilities due to maturity mismatches and rollover risks.

Many participants also discussed recent and future developments in stablecoins and their potential impact on the financial system. Participants noted that after passage of the GENIUS Act, stablecoin usage might increase and could help improve payment system efficiency. They also indicated that stablecoins might boost demand for their backing assets, including U.S. Treasuries. Participants expressed concerns about the broad impacts stablecoins might have on the banking system, financial system, and monetary policy implementation, considering this area worthy of close attention, including careful monitoring of various assets used to support stablecoins.

The Federal Reserve stands at a crossroads of policy turning points, where every change in wording could trigger market upheaval. The central bank's next moves will be crucial for global financial markets and investor strategies in the coming months.