Fed Officials Worry About Persistent Inflation, Higher Rates Loom

Minutes from the Federal Reserve's July 28-29 meeting revealed that many officials believe higher interest rates will be necessary if inflation doesn't subside. The minutes, released on Wednesday, showed that Fed officials were heavily focused on the threat of stubbornly elevated inflation.

The central bank voted 9-3 to keep its key short-term interest rate unchanged at about 3.6%. However, some officials pointed out that even after excluding prices of items most directly affected by tariffs and energy prices, underlying inflation appeared to be elevated. Core PCE prices are expected to have risen 3.3% in July from a year ago, a much higher reading than CPI.

New Fed chair Kevin Warsh has said he will provide less 'forward guidance' about the Fed's plans, which has unnerved Wall Street investors. The yield on the key 10-year Treasury note touched its highest point more than a year at over 4.7% before falling back Wednesday. Mortgage rates have followed suit, lifting borrowing costs for potential buyers.