Fed Minutes Show Officials Weighing Rate Hike If Inflation Persists

Federal Reserve officials at their April 28-29 meeting discussed the possibility of raising interest rates if inflation remains persistently above the 2 percent target, according to minutes released Wednesday. The rate-setting Federal Open Market Committee voted to keep its benchmark rate in the 3.5 percent to 3.75 percent range. Four policymakers dissented, the most since 1992.

A majority of participants highlighted that some policy firming would likely become appropriate if inflation were to continue to run persistently above 2 percent. Officials noted the Iran conflict has sent oil prices up by more than 50 percent and driven broader price pressures.

The vast majority of participants noted an increased risk that inflation would take longer to return to the Committee's 2 percent objective than they had previously expected. The minutes stated that many participants would have preferred removing language suggesting an easing bias in future rate decisions.

Three of the four dissenting votes came from regional presidents who advocated keeping options open for rate increases. They objected to language in the post-meeting statement that referenced additional adjustments to rates. One official dissented in favor of a rate cut. The group agreed to keep rates steady but differed on how long the war's impact on inflation would last.

The meeting was the last chaired by the outgoing chair. Incoming Chair Kevin Warsh will convene his first meeting on June 16-17. Warsh was appointed by President Trump and has previously argued for lower interest rates. Market pricing currently points to a higher probability that the committee's next move will be a hike.

“A majority of participants highlighted, however, that some policy firming would likely become appropriate if inflation were to continue to run persistently above 2 percent.”