FOMC Minutes Reveal Growing Concerns About Persistent Inflation

The Federal Open Market Committee (FOMC) minutes from their July 28-29 meeting revealed growing concerns about persistent inflation among members. Despite acknowledging that inflation was elevated, some participants noted that even after excluding prices affected by tariffs and energy costs, underlying inflation appeared to be high.

According to the staff review, near-term inflation compensation declined notably after the June FOMC meeting but moved up only marginally thereafter despite a sharp increase in oil prices. Market outreach and written responses to the Open Market Desk Survey of Market Expectations (Desk survey) indicated that this decline was attributed to investors' perceptions of the Committee's strong resolve to deliver price stability.

Fed Chair Kevin Warsh proposed a reduced schedule of six FOMC meetings beginning in 2027, stating that this would allow more information to accumulate between meetings and provide policymakers and staff with more time to consider strategic monetary policy issues. However, no decisions regarding possible changes in the meeting schedule were made.

The minutes also noted that while inflation remained elevated, labor market conditions remained stable, and real gross domestic product (GDP) continued to expand. The staff's inflation forecast was similar to the one prepared for the June meeting, with total inflation expected to decline over the second half of 2026 as retail gasoline prices were forecast to move lower and core inflation was projected to slow modestly.