Fed Minutes Show Some Members Favored Rate Hike in June

The Federal Reserve's June 16-17 meeting minutes, released Wednesday, show that some participants saw arguments for raising interest rates even as the committee voted unanimously to hold the federal funds rate at 3.5%-3.75%. Source: La República, Infobae

The debate over rates

• Some participants commented that events provided grounds for a rate increase but supported maintaining the current target for this meeting. Source: Infobae
• The Summary of Economic Projections showed a split: nine officials favored at least one quarter-point hike this year, eight saw no change or a cut, and one anticipated a reduction. Source: El País
• The new Fed chair Kevin Warsh declined to present a rate forecast, consistent with his criticism of forward guidance. Source: La República

Inflation risks and forward guidance

• Many participants noted that elevated commodity prices and supply disruptions could persist longer than expected. Source: Infobae
• A majority pointed to scenarios where inflation remains high due to strong AI-related demand, Middle East conflict, or tariffs, likely justifying policy tightening. Source: El País
• Several participants saw an opportunity to shorten the post-meeting statement, reducing forward guidance, echoing Warsh's preference for cryptic communication akin to Alan Greenspan. Source: El País

Outlook

Since the meeting, inflation data (PCE) rose 4.1% year-over-year in May, the highest since April 2023, driven by energy prices linked to the Iran conflict. Source: La República However, the ceasefire and subsequent hostilities have caused oil price fluctuations, adding uncertainty. Source: La República