Synopsis:

Barclays expects the FOMC minutes from the May meeting to reflect heightened uncertainty around the economic outlook, shaped largely by tariff impacts. The Fed is likely to emphasize a patient stance, with balanced risk assessments for both inflation and unemployment.

Key Points:

• Tariff Impacts:
  Participants likely discussed the effects of tariffs on growth, jobs, and inflation, acknowledging that the economy was solid in Q1 but now faces elevated uncertainty.

• Rising Risks:
  The minutes are expected to reveal concerns that risks to both higher inflation and higher unemployment have increased.

• Inflation Expectations:
  Several participants likely noted recent increases in inflation expectations, particularly from the University of Michigan survey.

• Policy Caution:
  Barclays expects the Fed to signal no urgency in adjusting rates and to express high uncertainty about the appropriate policy path.

• Framework Discussion:
  Additional insight is expected into how participants view inflation dynamics and the application of the Fed’s flexible average inflation targeting (FAIT) framework.

Conclusion:

Barclays anticipates the May FOMC minutes to reflect a Fed committed to a "wait-and-see" strategy, carefully monitoring inflation and employment risks amid tariff-induced uncertainty, while remaining flexible and balanced in future policy decisions.