Fed officials disagreed last month about the future of interest rates, with policymakers considering scenarios in both directions, according to meeting minutes released Wednesday.
At Kevin Warsh’s first meeting as chairman of the Federal Open Market Committee on June 16-17, participants saw an outcome in which inflation would ease and interest rates could be cut, while others envisioned a scenario where price increases remained high and led to rate hikes.
In a post-meeting press conference, Warsh claimed the discussion was a “family dispute” and ended with the committee unanimously voting to keep the Fed’s benchmark funds rate in the range of 3.5% to 3.75%, where it has remained throughout 2026.
However, the minutes did not elaborate on the drama that had transpired, instead outlining a variety of views from members without biasing the committee in either direction. The grid, which Mr. Warsh dotplotted with the forecasts of each member who did not participate, tilted slightly towards one rate hike this year and then every two years thereafter.
Asked to judge the most likely scenario, “many participants indicated that the appropriate level for the federal funds rate would be within or slightly below the current target range at the end of this year,” the minutes said.
“However, many other participants assessed that the appropriate level for the federal funds rate would be above the current target range at the end of this year,” the document said.
“Participants noted that future policy actions will depend on incoming information,” the minutes read.
Inflation has been trending upward for much of the past year, first accelerated by President Donald Trump’s tariffs and then exacerbated by the Iran war. But economists are divided on its durability, especially as energy prices have plummeted in recent weeks.
“Inflation is likely to remain high in the near term and begin to decline as the effects of tariffs and energy price increases wear off, and other supply disruptions related to the closure of the Strait of Hormuz diminish. Participants determined that risks to the inflation outlook remain tilted to the upside,” FOMC officials said in a statement.
Participants also noted the impact of artificial intelligence, observing that “upward pressure on technology products and electricity prices is likely to continue due to continued strong demand for AI infrastructure.” Warsh said he believes AI will eventually eliminate inflation by increasing productivity.
The market had little reaction to the minutes’ release, with stock market futures trading negative and U.S. Treasury yields rising.
“There is some ambiguity in the minutes, suggesting there are multiple competing views on policy,” said Jeffrey Roach, chief economist at LPL Financial. “If any forward guidance could be drawn from the minutes, it would be that the committee is working on a wide range of scenarios and will not commit to any particular scenario until incoming data provides the necessary clarity.”
At 14 pages, the meeting summary was slightly shorter, although not significantly shorter than typical announcements, and followed Warsh’s repeated remarks that Fed officials should not communicate too much about their future intentions.
Accordingly, the post-meeting statement was about one-third the size of a typical communiqué. Officials at the meeting appeared to approve of the tougher message.
“Many participants noted that now is an appropriate time to consider significant changes to the FOMC’s postmeeting statement,” the minutes read. “The majority of participants said there were benefits to keeping statements short.”
Otherwise, the document outlines what happened during the two-day meeting in which the Federal Open Market Committee approved a brief statement that stated it was determined to keep the benchmark interest rate unchanged and restore “price stability” to the U.S. economy.
In particular, language indicating previous moderation bias was removed because “most participants emphasized that they preferred not to repeat the word.”
The post-meeting statement removed boilerplate language explaining the state of the economy and the committee’s approach to achieving its twin goals of low inflation and full employment.
The minutes were released less than two months into Warsh’s term as chairman, a Trump appointee. For years. The president had criticized Warsh’s predecessor, Jerome Powell, for not lowering interest rates.
Since taking office, Mr. Warsh has promised to overhaul the Fed’s operations in a number of ways.
At a press conference in June, he outlined five task forces that will address specific topics such as communications. The minutes only mention the group’s creation and note that “some participants commented that they welcomed the opportunity to review the committee’s communication tools and practices.”
Since then, Warsh has made only one public appearance. At the European Central Bank’s forum in Portugal, the central bank’s leaders were largely cautious about their views on the direction of policy, consistent with their aversion to so-called forward guidance on monetary policy intentions.
