Fed meeting minutes signal possible interest rate hikes ahead

Federal Reserve officials are seriously considering whether to increase interest rates again to control inflation, according to minutes from the Fed’s April meeting. It is a reversal from previous discussions of rate cuts.

The meeting minutes show that the majority of policymakers believed further rate hikes could be necessary if inflation remains above the central bank’s 2% target. It is at 3.8% now.

While officials voted to keep rates unchanged, several members objected to language in the statement that still suggested future rate cuts were more likely.

The change in tone follows rising energy prices caused by tensions in the Middle East.

The US and Israeli strikes on Iran, along with disruptions in the Strait of Hormuz, have pushed oil prices higher and increased fears that inflation could remain elevated for longer.

Investors have rapidly changed expectations. Futures markets now show nearly a 50% chance of at least one quarter-point rate hike before the end of 2026. The yield on the 10-year Treasury note has also climbed from about 4% in March to around 4.6%, raising mortgage and business borrowing costs.

Officials are also watching a strong labor market and heavy artificial intelligence spending, which some economists believe could increase demand and add more inflationary pressure rather than lowering costs in the short term.

Fed Chair Jerome Powell will hand leadership to Kevin Warsh before the central bank’s next policy meeting in June. Warsh is set to be sworn in on Friday.