Summary of Fed Minutes Impact on EUR/USD
On October 7, 2026, the EUR/USD currency pair showed limited reaction to the release of the Federal Reserve's minutes from their September meeting. The minutes revealed that all 19 Federal Reserve officials supported the recent interest rate increase, with most participants indicating that another rate hike in 2026 would likely be appropriate.
The Fed officials justified the rate increase from a risk-management perspective, particularly in light of ongoing inflationary pressures. Many participants noted that the underlying momentum of the U.S. economy was stronger than previously anticipated. Notably, the investment related to artificial intelligence (AI) has exceeded expectations, which is expected to bolster economic activity and investment demand.
The labor market is projected to remain stable, although several Fed officials expressed that the current level of interest rates is either no longer restrictive or only mildly restrictive. The Fed's assessment indicates that the U.S. economy continues to expand at a solid pace, despite a gradual cooling in the labor market. Consumer spending and private investment are relatively strong, with domestic demand growth accelerating in the first half of the year, outpacing overall GDP growth.
However, the labor market is showing signs of normalization, with the unemployment rate falling to 4.1% in July and August, but nonfarm payroll growth has slowed significantly. Wage and labor-cost growth are also below year-ago levels. The Fed does not interpret this as a sharp deterioration in employment conditions but rather as a normalization following a period of robust labor market growth.
Inflation remains the primary concern for the Fed, with estimates indicating that PCE inflation rose to approximately 3.3% year-over-year in August, while core PCE inflation remained close to 3.4%. Price pressures are attributed to higher goods prices due to tariffs, energy costs, geopolitical tensions, and increased technology-related spending linked to AI infrastructure expansion. Overall, the Fed maintains a cautious and restrictive approach to monetary policy due to inflation being above target levels.
Following the release of the Fed minutes, the EUR/USD initially moved slightly higher but later erased some gains, stabilizing around the 1.12 mark after a recent decline. The minutes did not lead to significant volatility in the currency pair.
In subsequent updates, the EUR/USD fell below 1.12 amid hawkish remarks from Fed official Waller, and other market movements included a notable decline in oil prices impacting the stock market.