US Fed Debates Rate Hikes as Inflation Risks Persist Amid AI-Driven Demand
The US Federal Reserve's latest minutes signal a growing debate over interest rate hikes as inflation risks persist. The Fed could face pressure to raise rates in coming months if inflation fails to moderate, according to the minutes of the Federal Open Market Committee's July 28-29 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 due to renewed geopolitical tensions, higher energy costs, and strong demand associated with the artificial intelligence buildout.
The FOMC decided to keep the federal funds target range unchanged at 3.5-3.75 per cent in a 9-3 vote. Three members, Beth Hammack, Neel Kashkari, and Lorie Logan, dissented and favoured a 25-basis-point increase.
The minutes revealed a broader debate over the need for tighter policy. Several participants supported a 25-basis-point hike, arguing that price pressures were broad-based and that a more restrictive stance could help prevent the need for sharper tightening later. Many participants also said policy tightening would likely be necessary if inflation did not decline.