Federal Reserve officials were split last month about the future of interest rates, with policymakers entertaining scenarios in either direction, according to meeting minutes released Wednesday.
In Kevin Warsh‘s first meeting June 16-17 as chairman of the Federal Open Market Committee, participants saw outcomes where inflation could ease and allow lower rates, while others envisioned a scenario where price increases stay elevated and lead to hikes.
During his post-meeting news conference, Warsh billed the debate as a “family fight” that ended with the committee unanimously voting to keep the Fed’s benchmark funds rate anchored in a range between 3.5%-3.75%, where it has been for all of 2026.
However, the minutes did not elaborate on any drama that had taken place and outlined divergent views from members without a bias to which way the committee was leaning. The dot-plot grid of individual members’ expectations, in which Warsh did not participate, narrowly tilted toward one rate hike this year, then a cut in each of the following two years.
Asked to judge their most likely scenario, “many participants indicated that the appropriate level of the federal funds rate would be within or slightly below the current target range at the end of this year,” the minutes stated.
At the same time, the document also noted that “many other participants, however, assessed that the appropriate level of the federal funds rate would be above the current target range at the end of this year.”
“Participants noted that their future policy actions would depend on incoming information,” the minutes said.
Inflation has been on the rise for much of the past year, fueled earlier by President Donald Trump’s tariffs then exacerbated by the Iran war. Economists, though, have been split as to its durability, particularly since energy prices have plunged in recent weeks.
FOMC officials expressed “that inflation would remain elevated in the near term and then begin to decline as the effects of tariffs and energy price increases wane and other supply disruptions related to the closure of the Strait of Hormuz diminish. Participants judged that the risks to the inflation outlook were still tilted to the upside.”
Markets reacted little to the minutes release, with stock market futures holding negative and Treasury yields rising.
“There’s some ambiguity in the minutes, suggesting several competing views on policy,” wrote Jeffrey Roach, chief economist at LPL Financial “If we can tease out any forward guidance from the minutes, it would be the committee is working through a wide range of scenarios and will not commit to a specific scenario until the incoming data provides necessary clarity.”
The meeting summary, which at 14 pages was somewhat shorter though not dramatically so than the typical release, followed Warsh’s repeated statements that Fed officials should communicate less about their future intentions.
Keeping with that, the post-meeting statement was about one-third the size typical of the communique. Officials at the meeting seemed to approve of the tighter message.
“A number of participants noted that it was an opportune time to consider significant changes to the FOMC’s postmeeting statement,” the minutes said. “A majority of participants remarked that they saw advantages in shortening the statement.”
The document otherwise provided broad strokes of what happened during the two-day session in which the Federal Open Market Committee approved the terse statement saying it was keeping its benchmark interest rate unchanged and was resolved to restore “price stability” to the U.S. economy.
Notably, it removed language that had indicated a prior easing bias, as “most participants emphasized that they preferred not to repeat the Language.”
The post-meeting statement eliminated boilerplate language to describe economic conditions and the committee’s approach to achieving its twin goals of low inflation and full employment.
The minutes come less than two months into Warsh’s term as chairman, a position to which he was nominated by President Donald Trump. For years. the president had criticized Warsh’s predecessor, Jerome Powell, for not pushing interest rates lower.
Since taking the reins, Warsh has pledged to revamp the Fed’s operations in a variety of manners.
At the June news conference, he outlined five task forces that will address individual topics, including communication. The minutes simply stated the creation of the groups, noting that only “some participants commented that they welcomed the opportunity to review the Committee’s communications tools and practices.”
Since then, Warsh had made only one public appearance. At a European Central Bank forum in Portugal, the central bank leader was largely circumspect about where he thinks policy should go, consistent with his distaste for so-called forward guidance on monetary policy intentions.
