MW Fed interest-rate rate hike chances grow, minutes from Powell's last meeting suggest
By Greg Robb
Fed officials see a growing risk that inflation could stay higher for longer
Federal Reserve Chair Jerome Powell held his last interest-rate-policy committee press conference in April. Kevin Warsh is set to be sworn in as Fed chair on Friday.
Federal Reserve officials showed growing support at their April meeting for taking the first step toward a possible interest-rate hike, according to minutes of the meeting released Wednesday.
Policymakers said that high energy prices and tariffs were continuing to put upward pressure on overall inflation.
"The vast majority of participants noted the increased risk that inflation would take longer to return to the Fed's 2% objective than they had previously expected," the minutes read.
In April, the Fed left rates unchanged, in a range of 3.5% to 3.75%, for the third straight meeting. There were three dissents from regional Fed presidents who wanted to remove language in the statement that hinted that the next move by the Fed would be a rate cut.
The minutes show that other Fed officials supported this view. "Many" Fed officials said they would favor a move to language that indicated the next move could be a rate cut or a rate hike.
That's the necessary first step toward any potential hike. At his press conference in April, Federal Reserve Chair Jerome Powell said that support for the removal of neutral language was growing.
According to the minutes, "a majority" of Fed officials also stressed that some hikes would likely become appropriate if inflation were to remain above 2%.
Higher fuel prices are spilling over to shipping costs, airfare and fertilizer prices. Fed officials noted that recent price increases in the information technology and software sectors had contributed to higher inflation.
Money markets see a growing probability of a rate hike late this year. Traders in derivative markets put the chance of a rate hike by December at 60%.
Incoming Fed Chair Kevin Warsh is expected to be sworn in on Friday at the White House.
Warsh has supported the quick rate cuts favored by President Donald Trump, but economists said Warsh's colleagues at the Fed are unlikely to go along with any easing until the threat of persistent inflation has cleared.
On Tuesday, Trump seemed resigned to the fact that there would not be a rate cut when the Fed next meets, in June. The change in tone came in an interview with the Washington Examiner, in response to a question about whether Warsh would cut interest rates, even as markets are viewing a hike as more likely. "I'm going to let him do what he wants to do," Trump said. "He's a very talented guy, he's going to be fine, he's going to do a good job."
"The Fed is likely on hold for some time, awaiting clarity on the Iran war, tariff effects, and ultimately the path for inflation," said Sal Guatieri, senior economist at BMO Capital Markets, in a note to clients.
"While it is in no rush to raise rates, that possibility will only grow if inflation remains stubbornly high ... regardless of the previous views of the incoming Chair," he added.
Guatieri said he thought the Fed's "dot plot" may no longer show the median Fed member calling for one rate cut by year-end and another cut next year. The Fed is scheduled to update its forecast next month.
Kathy Bostjancic, chief economist at Nationwide, said in an email that the market is premature in pricing in a rate hike by next March, however. She said the run-up in energy prices will be temporary and will not spill over meaningfully to core inflation.
-Greg Robb
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May 20, 2026 16:01 ET (20:01 GMT)
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