Fed officials see rate hike ahead if inflation stays elevated, minutes show

April FOMC minutes were unequivocally hawkish, re-introducing a hiking option if inflation persists. 'Various' participants voiced willingness to tighten further. Many wanted to remove the statement's easing bias, citing elevated inflation risks from geopolitics, energy, and wages. The bar for cuts is high: clear disinflation or labor weakness is required. Hawks are in control, signaling a more aggressive tone for the June meeting and challenging the market's dovish consensus.

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Fed officials see rate hike ahead if inflation stays elevated, minutes show

speaker1

The April FOMC minutes were hawkish: the majority of the board saw rate hikes if inflation continued to run persistently above 2%, and many wanted to remove the easing bias in the statement.

Of the 19 in the room (12 voted), many wanted to remove the easing bias because a vast majority saw an increased risk of inflation taking longer to return to the 2% target. The upside risk to inflation and downside risk to employment were both seen as elevated.
speaker1

Several members wanted to lower the funds rate only when disinflation was clearly back on track or there was a weakening of the labor market.

Almost all were concerned the Middle East conflict could last longer than expected and energy prices could remain elevated even after the conflict ended. There was concern about continued above-target inflation pushing up wages, which is one of the Fed's biggest concerns.
speaker1

There was good news on the labor market, expected to remain stable, and GDP was expected to remain stable.
speaker1

The hawkish wing of the committee is larger than the dovish wing. The hawks look like they were controlling the meeting, and we might see that in the June meeting express itself more, not in a rate hike, but certainly in a change in tone of the Fed.

The dovish wing has some arguments for reducing rates, but the hawks are in control.

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