Majority of Fed Officials Say Rates Should Rise if Inflation Persists

It was confirmed on the 20th that the Federal Reserve (Fed) is considering another rate hike.
According to the minutes of the Federal Open Market Committee (FOMC) meeting held on April 28-29 and released that day, a majority of FOMC members concluded that rates should be raised if the Iran War continues and fuels inflation.
The minutes stated that "many participants emphasized that if inflation continued to run persistently above the 2% objective, some degree of monetary policy tightening would likely be appropriate." They also said that "many participants indicated a preference for removing the phrase 'easing bias' from the policy statement, given the direction of potential future FOMC rate decisions."
At the time, the FOMC kept the benchmark rate unchanged at 3.50% to 3.75%. Still, four members dissented from the statement, the most since 1992. Excluding one member who argued for a rate cut, the other three opposed language suggesting that a cut would be the Fed's next move. The main focus of the meeting was the impact of the Iran War on inflation and monetary policy.
The minutes also said participants agreed that the Iran War was having a "significant impact" on the Fed's dual mandate of maximum employment and price stability. They were divided, however, on how long that impact would last.
Last month's FOMC meeting was the final one chaired by Jerome Powell. Kevin Warsh, who is said to have promised Donald Trump a rate cut, is expected to take the lead on Fed monetary policy starting with the FOMC meeting on the 16th and 17th of next month. Market expectations, however, have increasingly shifted toward a 0.25 percentage point rate hike by the end of this year or early next year.
That is because the Iran War has led to a blockade of the Strait of Hormuz, pushing international oil prices up by 50% and reigniting inflation. U.S. consumer price inflation rose to 3.8% in April, the highest level in three years, as oil prices surged on the war.
dympna@fnnews.com Song Kyung-jae Reporter