Fed minutes show more policymakers leaning toward rate hike
Federal Reserve minutes from last month's meeting showed a significant share of policymakers were preparing for a new interest-rate increase to lean against inflation risks fanned by the Iran war's energy shock. The record indicated a 25 basis-point hike could be on the table by year-end if price pressures do not ease.
Federal Open Market Committee minutes released on Wednesday showed a significant share of policymakers viewed another interest-rate hike as warranted if the spike in crude oil prices pushes inflation expectations higher. Several participants noted that core services inflation could stay sticky through the summer.
The minutes cover the meeting held as the chair seat transitioned from Jerome Powell to Kevin Warsh. The FOMC kept the federal funds target range at 4.25%–4.50% and said it would remain data-dependent. Still, a meaningful contingent recorded that the current stance may not match the prevailing balance of risks.
Markets reacted quickly. The US 2-year Treasury yield rose 8 basis points to 4.68%, while equity futures slipped modestly. Money markets now price the probability of a 25 basis-point hike by year-end at 38%, up from below 20% earlier this week. Investors are now focused on the mid-June CPI release and Warsh's first press conference at the helm.
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