Federal Reserve officials were divided last month over the future of interest rates, with policymakers cheering the situation either way, according to meeting minutes released Wednesday.
At Kevin Warsh’s first meeting on June 16-17 as chairman of the Federal Open Market Committee, participants envisioned outcomes in which inflation could slow down and allow prices to drop, while others envisioned a scenario in which inflation remained high and led to hikes.
In his post-meeting press conference, Warsh called the debate a “family battle” that ended with the committee voting unanimously to keep the Fed’s interest rate on hold in the range of 3.5%-3.75%, where it was for the rest of 2026.
However, the minutes did not explain in detail about the game that took place and expressed the different opinions of the members without being biased as to which side the committee leans on. The dot grid of expectations for individual members, in which Warsh did not participate, is slightly skewed toward a one-digit increase this year, then a decrease in the next two years.
Asked to judge their likely position, “many participants indicated that the appropriate level of the federal funds rate would be at or below the current target range by the end of this year,” the minutes said.
At the same time, the document also noted that “many other participants, however, assessed that the appropriate level of the federal funds rate will be above the current target range by the end of this year.”
“Participants noted that their future policy actions will depend on incoming information,” the minutes said.
Inflation has been rising for much of the past year, fueled earlier by President Donald Trump’s tariffs fueled by the Iran war. Economists, however, are divided on its durability, especially since electricity prices have fallen in recent weeks.
FOMC officials expressed that “inflation will remain high in the near term and then begin to decline as the effects of cost and energy price increases diminish and other supply disruptions related to the closure of the Strait of Hormuz diminish.
Markets were slow to react to the release of the minutes, with stock market futures holding the negative and Treasury yields rising.
“There is some ambiguity in the minutes, which raises several conflicting views on policy,” wrote Jeffrey Roach, chief economist at LPL Financial. “If we were to defer any further directives to the minutes, it would be that the committee is working on multiple scenarios and will not commit to a specific scenario until the incoming information gives us the necessary clarity.”
The summary of the meeting, which at 14 pages was somewhat shorter though not much longer than a regular release, followed repeated statements by Warsh that Fed officials should be tight-lipped about their future intentions.
Accordingly, the post-meeting statement was about one-third the size of the standard briefing. The officials who attended the meeting seemed to agree with this strong message.
“A number of participants noted that it was an opportune time to consider significant changes to the FOMC meeting statement,” the minutes said. “Most of the participants commented that they saw the benefit of shortening the statement.”
The document otherwise provided extensive reports of what happened during the two-day session in which the Federal Open Market Committee approved a brief statement saying it was keeping its interest rate unchanged and resolved to restore “price stability” in the US economy.
Notably, it removed language that had previously shown bias, as “many participants emphasized that they preferred not to repeat the Language.”
The post-meeting statement removed blanket language to describe economic conditions and the committee’s approach to achieving its twin goals of inflation and full employment.
The minutes come less than two months after Warsh took office as chairman, a position he was appointed to by Trump. Years. the president had criticized Warsh’s predecessor, Jerome Powell, for not cutting interest rates.
Since taking office, Warsh has pledged to reform the Fed in a number of ways.
At a press conference in June, he revealed five teams that will deal with different topics, including communications. The minutes simply mention the creation of the groups, noting that only “some participants noted that they welcome the opportunity to review the Committee’s communication tools and procedures.”
Since then, Warsh has only made one public appearance. At the European Central Bank’s meeting in Portugal, the central bank’s leader was tight-lipped about where he thinks policy should go, consistent with his distaste for so-called forward guidance on monetary policy objectives.
