Fed Minutes Signal Rate Hike Debate Amid Persistent Inflation Risks

The US Federal Reserve is facing growing pressure to raise interest rates in the coming months as inflation risks persist, according to the minutes of its July meeting.

Most participants expected inflation to decline over the rest of 2026 as the effects of tariffs and earlier energy price increases fade. However, policymakers remained concerned that inflation could prove more persistent, particularly amid renewed geopolitical tensions, higher energy costs and strong demand associated with the AI buildout.

The Federal Open Market Committee decided to keep the federal funds target range unchanged at 3.5-3.75 per cent in a 9-3 vote, despite three members - Beth Hammack, Neel Kashkari and Lorie Logan - favouring a 25-basis-point increase.

The minutes revealed a broader debate over the need for tighter policy, with several participants supporting a 25-basis-point hike to prevent sharper tightening later. Many participants also said policy tightening would likely be necessary if inflation did not decline.