Federal Reserve officials left little doubt in minutes released Thursday that they are in no rush to loosen monetary policy, citing a labor market that remains tighter than officials expected and inflation that has not yet convincingly returned to target. At their July meeting, participants noted payroll gains and wage growth that, while moderating from pandemic-era peaks, continued to sustain services inflation and keep overall price pressures above the Fed’s 2 percent goal.

The minutes show the Federal Open Market Committee met with the target federal funds rate at 5.25 to 5.50 percent and with most participants expressing concern that “conditions in the labor market remained tighter than they judged consistent with a sustained return to 2 percent inflation.” The document recorded that nonfarm payrolls had continued to expand, with private-sector employment additions described as “solid,” and that average hourly earnings growth was persistent enough to warrant ongoing vigilance.

“It was premature to begin to reduce the stance of policy,” one participant is quoted as saying, reflecting the prevailing judgment in the room. Another participant cautioned that reopening labor-market slack could take longer than previously expected, and urged the committee to wait for clearer evidence of disinflation before easing policy. A minority of officials favored preparing markets for eventual cuts later in the year if incoming data softened, the minutes said, but the majority concluded that the case for easing had not been made.

The document highlighted specific sources of concern: owner-equivalent rent and core services inflation remained elevated, and measures tied to labor costs suggested that wage growth was slowing only gradually. Staff analyses cited in the minutes projected that, absent continued restraint from policy, upside risks to inflation could reassert themselves. Participants also discussed the pace of balance-sheet runoff, with several officials noting that a smaller balance sheet could complement higher policy rates in restraining demand.

Markets reacted quickly. Futures-implied odds of a September cut dropped sharply after the minutes were published, with traders reducing the probability of a near-term move and pushing two-year Treasury yields higher. The dollar strengthened modestly on the news as investors priced in a longer interval of restrictive policy.

For policymakers, the minutes underline a familiar dilemma: tame inflation without tipping the economy into recession. Economists at several banks interpreted the document as signaling a bias toward patience, and some adjusted their forecasts to push expected easing into 2026. The Fed’s next challenge will be to reconcile continued labor-market resilience with steadily cooling price indexes; until then, the committee appears inclined to keep real rates elevated and wait for clearer signs that inflation is on a durable downward path.