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Fed officials lose patience on inflation
Archived — this story has rotated out of today’s deck. It is kept here in full.
The gist
Fed officials voted 9-3 to hold rates at 3.5%-3.75% in July, with many backing hikes if.
The Fed's patience is thinning, so rate hikes may come if price pressures don't.
Background
Inflation has overshot the Fed's 2% target for five years, driven by tariffs, the Iran war, and AI investment. At the July 28-29 FOMC meeting, most officials expected inflation to ease later in 2026, but many saw risks skewed to the upside. The minutes, released August 19, revealed growing impatience and support for higher rates if inflation doesn't decline.
How it unfolded
- May 2026Kevin Warsh became Fed chairman, inheriting a divided committee and inflation above target.
- Jul 28, 2026 -29, 2026FOMC voted 9-3 to hold rates at 3.5%-3.75%; three dissents favored a hike, the first such split since 2016.
- Aug 12, 2026CPI release showed inflation at 3.4%, still above the 2% target.
- Aug 19, 2026Minutes released; many officials said rate hikes would likely be necessary if inflation didn't decline.
Who’s saying what
- Hawks
- Several participants supported higher rates now to forestall a steeper, costlier tightening later.
- Doves
- Most officials expected inflation to ease as tariff and energy effects fade, favoring patience.
- Analysts
- Morgan Stanley sees energy shocks and AI boom as risks that could keep rates higher for longer.
- Caution
- BlackRock's Rick Rieder argues further hikes won't fix remaining inflation and may be unnecessary.
Still unverified
Warsh floated a six-meeting FOMC schedule for 2027, but this was only discussed, not decided.