Fed officials saw need for rate hike if inflation doesn't cool, minutes show — SkimNews
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- Fed officials indicated at the July 28-29 meeting that policy tightening would likely be necessary if inflation didn't decline, voting 9-3 to hold the federal funds rate at 3.5%-3.75%, where it has been all year.
- Three regional Fed presidents — Beth Hammack (Cleveland), Lorie Logan (Dallas), and Neel Kashkari (Minneapolis) — dissented in favor of a quarter-point hike, arguing preemptive action could forestall 'a steeper and potentially more costly sequence of tightening moves at a later stage.'
- Recent economic data showed mixed signals: June PCE prices fell 0.1% (annual still 3.7%, well above the 2% target), while nonfarm payrolls dropped 23,000 in July and unemployment fell to 4.1%, partly due to a shrinking labor force.
- Treasury yields climbed following Warsh's dovish post-meeting remarks but tumbled Wednesday after the Treasury Department announced increased purchases of longer-dated government debt, the part of the curve most sensitive lately.
- Market pricing shifted from expecting a September hike to expecting the Fed to stay on hold until December before its next increase.
- Warsh floated reducing FOMC meetings from eight per year to six, held roughly every two months — arguing more time between meetings would allow more information to accumulate — though no decisions were made and 2026's schedule is unaffected.
Why it matters: The 9-3 split — with three regional Fed presidents actively voting for a hike — signals more internal pressure on Warsh's patient stance than the 'hold' headline suggests. The dissenters' argument that a preemptive quarter-point could prevent costlier future hikes keeps inflation squarely in focus, even as July's payroll loss (-23,000) and June's PCE decline (0.1%) give the chairman room to wait.
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