Fed Officials Eye Higher Rates Amid Persistent Inflation Concerns

Minutes of the Federal Reserve's July meeting revealed that many officials believe higher interest rates will be necessary if inflation remains high.

The minutes, released Wednesday, showed that officials were heavily focused on the threat of stubbornly elevated inflation at the meeting on July 28-29.

Fed officials worried about the impact of the Iran war, tariffs, and heavy investment in AI infrastructure on prices. They noted that even after excluding volatile food and energy categories, underlying inflation appeared to be elevated.

Excluding these categories, core prices have cooled, with annual core inflation falling to 2.5% in July. However, the Fed pays more attention to a separate gauge, the personal consumption expenditures (PCE) price index, which is running hotter at 3.3%.

New Fed chair Kevin Warsh provided little guidance on the central bank's next steps at a news conference, unnerving Wall Street investors and threatening the Fed's inflation-fighting credibility.