WASHINGTON (TNND) \u2014 A majority of Federal Reserve officials believe higher interest rates might be necessary if recently accelerating inflation does not cool again, even as incoming Fed chair Kevin Warsh faces pressure to lower borrowing rates.<\/p>\n
Minutes from the Fed\u2019s April meeting showed how the war with Iran and corresponding spike in energy prices have roiled the economic outlook and what policy moves the central bank should make. The minutes, released on Wednesday, highlighted how the central bank\u2019s internal debate from when to start cutting rates to whether another hike may be needed.<\/p>\n
Most economists expected the Fed to cut rates at least once this year at the start of 2026, with inflation cooling and the effects of President Donald Trump\u2019s tariffs fading away. Those expectations have been dashed after the war with Iran led to spiking oil prices that have renewed upward pressure on inflation.<\/a><\/p>\n A majority of officials highlighted \u201csome policy firming would likely become appropriate if inflation were to continue to run persistently above 2 percent,\u201d according to the minutes.<\/p>\n \u201cTo address this possibility, many participants indicated that they would have preferred removing the language from the postmeeting statement that suggested an easing bias regarding the likely direction of the Committee\u2019s future interest rate decisions.\u201d The phrase referred to language some believe suggested the Fed\u2019s next move was more likely to be a rate cut than increase.<\/p>\n April\u2019s meeting, where the benchmark interest rate was left unchanged<\/a>, was one of the most divisive in decades with several committee members objecting to language they believed leaned too heavily toward future cuts. Many Fed watchers are expecting disagreement within the Federal Open Market Committee to remain a common theme moving forward as they navigate price concerns and an uncertain outlook.<\/p>\n Wall Street has increased bets on the next move from the Fed being a rate increase with the odds of at least one quarter-point hike reaching nearly 50% in futures markets, according to CME Group\u2019s FedWatch tool. Still, the Fed is also trying to keep a recently stabilized labor market on track and growth moving in the right direction.<\/p>\n \u201cFinancial markets are pricing in Fed rate hikes over the next 12 months, but we believe the bar is high. The Fed will likely talk tough but opt not to follow through with tightening monetary policy, as that would risk hurting the economy,\u201d Ryan Sweet, chief global economist at Oxford Economics, wrote in an analysis.<\/p>\n