Fed Minutes to Show Divided 'Family Fight' Over Rate Hikes
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- Federal Reserve officials indicated at the June 16-17 meeting they'll address persistent inflation with one rate hike this year, but the FOMC has only made a single move once since 2015 (in 2015 itself), typically adjusting in multi-move cycles.
- Kevin Warsh, chairing his first FOMC meeting, called the debate "a good family fight," and Standard Chartered's Steve Englander expects the minutes to be less informative, modeled on Paul Volcker's 1979-1987 era of opaque communication.
- Jim Bullard, former St. Louis Fed president, warned the Fed may need to act before the November midterm election—waiting too long could force aggressive action in winter or first half of next year to keep inflation under control.
- Bank of America raised its forecast to three quarter-percentage-point hikes before end of 2025, with economist Aditya Bhave saying the central bank will "reverse those cuts in short order," though BofA expects a brief cycle with the Fed on hold in 2027.
- The NY Fed's June consumer survey shows inflation expectations at multi-year highs: the one-year outlook hit 3.7% (highest since September 2023) and the three-year outlook reached 3.3% (peak since June 2022).
- CME Group's FedWatch tool shows traders pricing in a hike as early as September, then on hold for at least a year—contrasting with BofA's more aggressive call.
- Donald Trump appointed Warsh to replace Jerome Powell, whom the president frequently criticized, setting up political tension if the new chair moves to tighten policy before the midterms.
Why it matters: With inflation above the 2% target for five years and consumer expectations at multi-year highs, a single September hike may not be enough. BofA now sees three quarter-point hikes before year's end, which would reverse 2025's cuts. Warsh's expected shift toward less transparent minutes makes it harder for markets to price the path.
