Federal Reserve officials remained divided over monetary policy at their July 28–29 meeting, with several policymakers pushing for an immediate quarter-point rate increase and many others warning that further tightening could become necessary if inflation stays elevated, according to minutes released Wednesday.
The Federal Open Market Committee voted 9-3 to hold the federal funds rate at 3.50%–3.75%, the fifth consecutive meeting without a change after three rate cuts late in 2025. Dallas Fed President Lorie Logan, Cleveland Fed President Beth Hammack and Minneapolis Fed President Neel Kashkari dissented in favor of a 25-basis-point hike. Two nonvoting regional Fed presidents, Kansas City's Jeff Schmid and St. Louis Fed President Alberto Musalem, also later said they would have supported an increase.
Policymakers who backed tighter policy argued that price pressures appeared broad-based and that a more restrictive stance was required to protect the Fed's price-stability and employment goals. Some officials warned that failing to act could lead to “a steeper and potentially more costly sequence of tightening moves” later. The minutes described the inflation outlook as “highly uncertain,” with the renewed escalation of the Iran war adding to energy price concerns.
Since the July meeting, softer economic data have reduced expectations for a September rate hike. July retail sales posted their largest drop in more than a year, employers unexpectedly cut jobs, and prior hiring figures were revised lower. Federal funds futures pricing showed about a 36% probability of a September increase as of Wednesday morning, down from more than 70% at the end of July. The Fed is expected to keep rates unchanged at its September 15–16 meeting, though investors see a possible hike as soon as the October 27–28 meeting.
The minutes also showed Fed Chairman Kevin Warsh is considering reducing scheduled policy meetings from eight to six per year, though no decision was made. Falling Treasury yields earlier on Wednesday supported stocks and Bitcoin while pressuring the dollar, after the U.S. Treasury announced plans to increase purchases of longer-dated government debt.
