Treasury rushes into bond market as Fed minutes show many governors want to hike rates, not cut

Many Federal Reserve officials think the central bank will have to lift its key short-term interest rate in the coming months if inflation doesn’t subside, minutes of the Fed’s meeting last month showed.

The minutes of the July 28-29 meeting, released Wednesday , don’t provide specifics on how many of the 19 officials supported higher rates.

Only 12 of the 19 policymakers vote on the outcome.

Officials voted 9-3 at the meeting to keep their key rate unchanged at about 3.6%.

Inflation has since showed some signs of cooling , though gas prices have rebounded this month on renewed hostilities in the Middle East.

Wall Street investors now expect the Fed to remain on hold at its next meeting in September and potentially lift rates in December, though that outlook could change.

At last month’s meeting, Fed officials were heavily focused on the threat of stubbornly elevated inflation.

Fed officials worried that the Iran war, tariffs, and heavy investment in AI infrastructure were all boosting prices of a range of goods and services.

“Participants judged that their inflation outlooks were highly uncertain and that inflation risks were skewed to the upside,” the minutes said.

“Many participants assessed that (higher rates) would likely be necessary if inflation did not decline.” Some Fed officials pointed out that “even after excluding prices of items most directly affected by tariffs and energy prices, underlying inflation appeared to be elevated,” the minutes said.

Excluding the volatile food and energy categories, so-called “core” prices have cooled, with annual core inflation falling to 2.5% in July, the government said last week , according to the consumer price index.

Yet the Fed pays more attention to a separate gauge, the personal consumption expenditures (PCE) price index, which is running hotter than the CPI.

Core PCE prices are expected to have risen 3.3% in July from a year ago, a much higher reading than CPI.

Those figures will be reported Aug.