FOMC Divided on Rate Path, Cites Upside Inflation Risks
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- FOMC members were sharply divided at the June 17 meeting, with 'many' expecting rates at or below current levels by year-end and 'many others' expecting higher rates.
- Minutes flagged 'upside risks to price stability' as elevated while downside risks to employment had 'moderated a bit.'
- Officials cited AI-related demand, the Middle East conflict, and tariffs as factors that could keep inflation elevated.
- Most participants saw scenarios where inflation 'would soon begin to return to 2 percent,' in which case almost all thought holding or cutting rates would be justified.
- Kevin Warsh, presiding over his first FOMC meeting as Fed chairman, declined to offer his own projection or guidance, consistent with his longstanding critique of forward guidance.
- Committee projections released with the meeting showed officials evenly divided on whether a rate hike would be appropriate by year's end.
Why it matters: With the FOMC evenly split and Warsh withholding guidance, markets face maximum uncertainty heading into late 2026 — every inflation print now carries outsized weight. Business contacts already reporting 'notable cost pressures' from the AI buildout and tariffs give the hawkish camp concrete ammunition. The deadlock means no directional consensus until fresh data breaks it.
