Fed Officials See Interest Rate Hike as ‘Necessary’ If Inflation Doesn’t Ease Soon

Federal Reserve policymakers see an interest rate hike as likely if inflation does not ease in the coming months, according to newly release meeting minutes.

Minutes from the Federal Open Market Committee meeting held in Washington DC on July 28 and 29 suggest that there is growing acceptance on the panel that an increase to overnight interest rates may become necessary.

"Many participants assessed that policy tightening would likely be necessary if inflation did not decline," the minutes state. "Some participants commented that financial conditions might not currently be sufficiently restrictive to facilitate a return of inflation to 2%."

At the meeting, the majority of the 12-member panel voted to leave rates unchanged at a top range of 3.75%, where they have remained since January. But Fed Chairman Kevin Warsh, who called for lower rates before taking office in May, faces a rising chorus of discontent from more hawkish colleagues.

Chief among them Cleveland Fed President Beth Hammack, who along with Dallas Fed President Lorie Logan and Minneapolis Fed President Neel Kashkari voted to raise rates at last month's meeting.

"A few of the participants who favored raising the target range for the federal funds rate at this meeting judged that doing so would likely help forestall the need for a steeper and potentially more costly sequence of tightening moves at a later stage," the meeting minutes state.

The release of the meeting minutes on Wednesday was highly anticipated by market observers, as they shed light on the FOMC's split decision at a time when the Fed is scaling back its public communications.

Warsh has advocated for a less chatty central bank, arguing that policymakers should speak to markets primarily through their monetary policy decisions, rather than through statements, press conferences, and forecasts.

In contrast to the June meeting, when the minutes exposed sharp disagreements hiding behind the unanimous vote, the July m

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