Minutes from the July 28-29 meeting, released Wednesday, Aug. 19, say "many participants" thought a rate increase would be needed if inflation stays high.
The Federal Reserve left interest rates alone at its July 28-29 meeting, and the written account of that meeting, released Wednesday, Aug. 19, shows how many officials are close to voting for an increase. The Fed's rate-setting group, the Federal Open Market Committee (FOMC), held its benchmark rate — the one that feeds mortgage, car-loan and credit-card rates — at 3.50-3.75 percent, down from a 2024 peak of 5.25-5.50 percent. The vote was 9-3, the fifth straight meeting with no change; the three dissenters wanted a quarter-point increase. The Fed publishes this account about three weeks after each meeting. This one showed mounting concern about inflation that has stayed above the Fed's 2 percent goal for more than five years — the Fed's preferred price gauge ran 3.7 percent in June, about 1.7 points above that goal. Multiple officials said an interest-rate increase could become necessary later this year, and many participants viewed a move as potentially warranted if inflation does not come down. Some officials said financial conditions may not be tight enough to slow prices at all. The Financial Times, reporting on the same account, wrote that "many members of the FOMC thought a rate increase would soon be warranted if inflation remains high." Most participants still expected inflation to decline on its own.
What the three dissenting votes broke
- Cleveland's Beth Hammack, Minneapolis's Neel Kashkari and Dallas's Lorie Logan all voted no the same way, for a quarter-point increase — the first three-way, same-direction dissent since September 2016.
- It is the largest dissent against a new Fed chair since Arthur Burns in 1970, per St. Louis Fed records, and Kevin Warsh, the new chair, has run only two meetings.
- Two more regional presidents who do not hold a vote this year, Kansas City's Jeff Schmid and St. Louis's Alberto Musalem, were reported to be in the same camp.
- Voting against the decision is rare in normal times: about 6 percent of all Fed votes since 1957.
- Warsh also floated cutting the Fed's meeting count from eight a year to six, which would mean fewer scheduled chances to move rates.