FOMC Minutes: “A few” participants saw the case for raising rates
The Minutes of Kevin Warsh’s first meeting as Fed chairman are out and they have a hawkish tilt:
- Participants generally assessed that information received over the intermeeting period suggested that upside risks to price stability remained elevated while downside risks to achieving maximum employment had moderated a bit
- Most participants preferred to drop statement language suggesting an easing bias
- Staff raised inflation forecast for 2026 and 2027
- A few participants commented that there was a case for raising the target range for the federal funds rate, but those participants indicated that they supported maintaining the current target range at this meeting
- Several participants remarked that they did not see the current policy stance as restrictive
- Most participants pointed to scenarios in the context of stable labor market conditions, inflation would remain elevated due to strong AI-related demand, the conflict in the Middle East, or the effects of tariffs. In such scenarios, almost all of these participants indicated that some policy firming would likely be warranted
- Most participants remarked on scenarios in which inflationary pressures would dissipate and inflation would soon begin to return to 2 percent. In such scenarios, almost all of these participants noted that it would likely be appropriate to maintain or eventually lower the target range for the federal funds rate.
The committee held at 3.50-3.75% but the center of gravity has clearly shifted — the easing bias left the statement, a few members wanted to hike in June, and the split on year-end dots is now genuinely two-sided with “many" seeing rates above the current range. The scenario analysis is telling: in the sticky-inflation scenario, almost all participants said firming would be warranted; in the disinflation scenario, the best they offered was “maintain or eventually lower."
The inflation discussion is uncomfortable reading. Core PCE at 3.3% and rising, staff tracking 3.4% for May, and participants flagging broadening pressures — airfares, petrochemicals, ag inputs — beyond the tariff and Hormuz shocks. The AI buildout gets blamed for demand-side pressure on tech products and electricity, with productivity relief acknowledged but pushed into the “eventually" bucket.
This article was written by flc97fe4880a4b454993821fe0b770a597 at investinglive.com.