Minutes from the Federal Reserve's June meeting revealed a growing divide among officials over how aggressively to lower interest rates, as concerns over inflation from new trade tariffs clashed with signs of labor market weakness and continued economic strength.

The minutes, released Wednesday from the Federal Open Market Committee (FOMC) meeting held on June 17–18, showed that policymakers largely maintained a "wait-and-see" stance regarding future rate moves. The meeting ended with a unanimous decision to hold the benchmark interest rate steady at 4.25%–4.5%, a level that has remained unchanged since December 2024.

However, the discussions reflected an increasing split on the path forward for monetary policy.

According to the minutes, "Most participants viewed it as likely that it would be appropriate to lower the target range for the federal funds rate later this year," citing that inflationary pressures from tariffs may prove to be "temporary and limited," while economic growth and labor market strength may begin to wane.

Yet, the scope and timing of such cuts remained under debate.

Some officials reportedly supported a rate cut as early as this month, while others saw no need for any reduction in 2025. Although the minutes did not name specific individuals, Fed Governors Michelle Bowman and Christopher Waller had previously indicated that a rate cut could be on the table at the upcoming July 29–30 meeting if inflation continues to cool.

Conversely, "several" officials argued that the current rate level may already be close to neutral, suggesting that only a limited number of cuts may be needed. This view was supported by concerns that inflation remains above the 2% target and that the economy continues to show resilience.

(It is worth noting that in Fed terminology, "some" implies more officials than "several.")

During the meeting, the Fed updated its interest rate projections, anticipating two cuts in 2025, followed by three more in the subsequent two years.

This comes amid increasing pressure from President Donald Trump, who has called on Fed Chair Jerome Powell to resign and has repeatedly demanded a swift and substantial rate cut. Trump has voiced his frustration both publicly and via his Truth Social platform.

Powell, however, has remained firm in resisting political interference, emphasizing a cautious approach. He noted that the strength of the economy and lingering uncertainty around inflation warrant patience until more clarity emerges.

According to the minutes: "Although uncertainty around inflation and the economic outlook has diminished, participants judged that a cautious approach to policy adjustments remains appropriate."

Officials also warned that the Fed may face "difficult tradeoffs" if elevated inflation persists while job conditions worsen. They emphasized that future decisions would depend on how far inflation or employment deviates from their respective targets.

Since the June meeting, Trump has continued to engage in rapid-fire trade negotiations with major U.S. partners, frequently adjusting tariff timelines. After initially announcing tariffs on April 2, he has since issued a series of letters to foreign leaders warning of steep tariffs unless urgent measures are taken.

Despite these threats, recent data suggest that the new tariffs have not yet translated into broad-based price increases.

Consumer prices rose just 0.1% in May, and while inflation remains above the 2% goal, recent surveys indicate that public concern about long-term inflation is easing.

The minutes noted that many participants believed the ultimate inflationary impact of the tariffs could be limited if trade deals are reached soon, if companies adapt supply chains quickly, or if businesses absorb the costs through profit margins.

At the same time, job growth has clearly slowed—even though June’s nonfarm payrolls rose by 147,000 (beating expectations of 110,000), and the unemployment rate unexpectedly fell to 4.1%.

On the other hand, consumer spending weakened sharply. Personal consumption expenditures fell 0.1% in May, while retail sales declined by 0.9%, reflecting a cooling in household demand.

Nvidia has become the first company in the world to reach a market capitalization of $4 trillion, after its shares rose 2.4% on Wednesday to $164 per share, continuing to benefit from the sustained surge in demand for AI-related technology.

The U.S. company had first crossed the $1 trillion mark in June 2023, and has maintained rapid growth ever since.

Dan Ives, tech analyst at Wedbush Securities, described the milestone as “a historic moment for Nvidia,” adding: “They’re the only game in town — their chips are the new gold and oil.”

Nvidia shares had plunged in April when global markets were shaken by the escalating trade war led by U.S. President Donald Trump. Despite ongoing concerns about Trump’s trade policies, Nvidia’s stock has continued to rise since spring, reaching this latest milestone.

Eight years ago, Nvidia stock was worth less than 1% of its current value, driven at the time by competition with AMD over graphics card dominance. Today, its meteoric rise is tied to surging demand for the chips that power generative AI models such as ChatGPT.

Nvidia’s dramatic ascent has also elevated its CEO and co-founder, Jensen Huang, whom Mark Zuckerberg recently dubbed “the Taylor Swift of tech” — a reference to his rockstar-like status, particularly in Taiwan.

The company’s rising market value reflects Wall Street’s confidence in the AI sector, despite the turbulence caused by broader U.S. economic policies.

Nvidia reported revenues of $44.1 billion in the first quarter, up 69% year-over-year, with earnings per share reaching $0.81.

What makes Nvidia so special?

Origins:

Nvidia was founded in 1993 — during a now-famous meeting at a Denny’s restaurant — with a focus on designing a specific type of programmable chip.

For years, the U.S. chip market was dominated by Intel and AMD, who produced CPUs (central processing units) for general computing tasks.

Nvidia, by contrast, specialized in GPUs (graphics processing units), which had stronger image-rendering capabilities — initially useful for video games and graphics applications.

Eventually, it became clear that GPUs could execute parallel calculations more efficiently than CPUs, making them more energy-efficient and better suited for complex computational tasks.

Over time, major chipmakers began manufacturing their own GPUs, but they were late to the game. Nvidia had first-mover advantage, along with a suite of developer-friendly software, and a streamlined supply chain that enabled large-scale GPU production with unmatched speed and efficiency.

For example, carmakers began using Nvidia chips in driver-assistance programs that process visual data from sensors. All Tesla vehicles now include Nvidia hardware. Still, up until 2020, Intel’s market cap was larger than Nvidia’s.

COVID-19 and the AI explosion

During the pandemic, the shift to remote work, demand for data centers and cloud services, and booming interest in video games accelerated Nvidia’s revenues.

Then, Silicon Valley — led by OpenAI — began to recognize AI’s potential to transform business operations.

Thanks to its software ecosystem and efficient supply chain, Nvidia was ideally positioned to provide the computing power needed for AI adoption.

Nvidia’s fortunes took off like a rocket. At its current share price, the company is valued at nearly $3 trillion, rivaling Apple.

In a past CNBC interview, CEO Jensen Huang said the company’s success was a mix of “skill and luck,” noting: “We believed something new would happen someday, and the rest just required a little luck. It wasn’t foresight — it was accelerated computing.”

Today, virtually every major tech firm — including Amazon, Google, Meta, Microsoft, and Oracle — uses Nvidia chips.

Bloomberg has described Nvidia’s chips as “the backbone of AI model training,” while PNC analyst Amanda Agati called its dominance “near-total monopoly.”

Raj Joshi, senior VP at Moody’s, said Nvidia is “the dominant player in AI infrastructure,” and while other companies are racing to catch up, Nvidia’s 30-year experience designing GPUs gives it a major advantage.

Joshi added that Nvidia also leads in sectors like healthcare, saying: “They have a strong foothold in those markets too.”

The race to catch up

Thanks to its unique position, Nvidia can charge a premium for its chips — manufactured in Taiwan and so scarce that AI startups often complain about supply shortages.

The CHIPS and Science Act, passed under the Biden administration in 2022, aims to boost domestic GPU production, but doubts remain over whether the U.S. can meet demand.

Commerce Secretary Gina Raimondo said this week: “The volume of chips AI companies need is staggering,” and hinted that more federal support may be needed to keep up.

The new market anchor

Nvidia’s financial performance now holds major weight across U.S. stock indexes, according to Amanda Agati. “Nvidia has become a market anchor,” she said. “If data is the new oil, Nvidia is leading the pack.”

Originally known for gaming GPUs, Nvidia now provides the foundation for most AI applications.

Alan Priestley at Gartner called Nvidia “the technological leader in AI enablement,” while Dan Hutcheson of TechInsights said: “What Intel was to the PC, Nvidia is to AI.”

ChatGPT, for instance, was trained on 10,000 Nvidia GPUs within a Microsoft supercomputer — one of several such AI-focused systems, some public, others not.

According to CB Insights, Nvidia commands about 95% of the market for AI-focused GPUs. Its chips, used in data centers, cost around $10,000 each, with newer, more powerful versions priced even higher.

How did Nvidia gain this dominance?

The answer lies in a bold bet on its own tech — and good timing.

In 1999, Nvidia began developing GPUs for better image rendering. In 2006, Stanford researchers discovered the chips could accelerate mathematical computations, prompting Huang to invest in making GPUs programmable — expanding their use beyond graphics.

This became the foundation of modern AI.

In 2012, the AI model AlexNet was unveiled, trained on just two Nvidia chips. It completed training in days, not months — and researchers took notice.

Word spread quickly, and demand for Nvidia GPUs surged as researchers began building new AI tools.

Dominance and competition

Nvidia doubled down, developing AI-specific chips and easy-to-use software, pulling further ahead of rivals.

Startups like Metaphysic use Nvidia chips to train models that generate lifelike video — such as the viral Tom Cruise deepfake in 2021.

“There’s no substitute for Nvidia,” said co-founder Tom Graham. “They’re too far ahead.”

Still, Nvidia’s dominance is not unshakable. Rivals like AMD, Intel, and startups like Graphcore are developing custom AI chips.

Graphcore CEO Nigel Toon said: “We’ve built a processor tailored to AI as it exists today and will evolve in the future,” but admitted that competing with Nvidia is a steep challenge.

Ian Buck of Nvidia responded: “Everyone needs AI now — and others will need to find their role in supporting it.”

The U.S. Energy Information Administration (EIA) on Wednesday released its official weekly crude oil inventory data, which showed an unexpected increase in stockpiles.

According to the government agency, U.S. crude oil inventories rose by 7.1 million barrels to 426.1 million barrels last week, defying market expectations for a decline of 1.5 million barrels.

Meanwhile, gasoline stockpiles fell by 2.7 million barrels to 229.5 million barrels, and distillate inventories — which include heating oil and diesel — declined by 0.8 million barrels to 102.8 million barrels.

U.S. stock indexes rose at the start of trading on Wednesday as markets assessed developments in tariff policy and awaited the release of the Federal Reserve’s meeting minutes.

On Tuesday, U.S. President Donald Trump expanded the scope of his global trade war by announcing a 50% tariff on copper imports. He added that long-threatened tariffs on semiconductors and pharmaceuticals were also coming soon.

The announcement followed a day after Trump imposed sharp tariff hikes on 14 trade partners, including key U.S. suppliers South Korea and Japan. He also renewed his threat to impose 10% tariffs on imports from Brazil, India, and other BRICS countries.

Separately, Trump renewed his attacks on Federal Reserve Chairman Jerome Powell, calling once again for his immediate resignation.

Later today, the Federal Reserve will release the minutes of its most recent meeting, which markets will scrutinize for signals regarding the central bank’s policy outlook.

As for market performance, the Dow Jones Industrial Average rose slightly by less than 0.1% (equivalent to 3 points) to 44,240 points by 16:18 GMT. The broader S&P 500 index gained 0.1% (7 points) to reach 6,233 points, while the Nasdaq Composite climbed 0.4% (80 points) to 20,498 points.