Fed Minutes Show Many Officials Said Rate Hikes May Be Needed

**SPEAKER_1** (0:02)
Bloomberg Audio Studios, Podcasts, Radio, News.
This is Bloomberg Businessweek Daily, reporting from the magazine that helps global leaders stay ahead, with insight on the people, companies, and trends shaping today's complex economy, plus global business, finance, and tech news as it happens. The Bloomberg Businessweek Daily podcast with Carol Massar and Tim Stenovec. On Bloomberg Radio.

**Carol Massar** (0:32)
It is Fed Wednesday, a Fed Wednesday, August 19th, 2026 We do get the Fed minutes in just a moment, just a few seconds. This is Wall Street staged a rebound after the Treasury set up plans to boost buybacks of longer dated bonds, a signal that the US wants to lower borrowing costs after yields hit multi-decade heights. Let's head to the Federal Reserve and those latest minutes, and Michael McKee. Mike.

**Michael McKee** (0:57)
Well, Kevin Warsh was right. The minutes do suggest there was a bit of an old-fashioned family fight at the July meeting as participants argued over the outlook for inflation and monetary policy. Two lines of general agreement stand out. Many participants assessed that policy tightening would likely be necessary if inflation did not decline. Now, remember, this meeting took place after the June CPI report that showed inflation had declined more than anticipated.
And participants judged that their inflation outlooks were highly uncertain and that inflation risks were skewed to the upside. Many participants noted that the recent re-escalation of the conflict in the Middle East significantly clouded the inflation outlook. Inflation was first and foremost in the debate, and the committee's counting words show a lot of division. Several participants noted that price increases over the past year were broad-based, and some said underlying inflation appeared to be elevated. AI spending had also been subject to price pressures. But inflation expectations remained contained, and most participants anticipated inflation would step down over the rest of the year, as the effects of tariffs and earlier energy price increases wane. But again, what?
Many participants noted the possibility that inflation might be more persistently elevated.
Several noted companies had accommodated price increases by compressing margins, but they suggested if the Middle East conflict went on, they might have to raise prices, while a couple noted that business contacts judged consumers would resist those price increases. They also disagreed on the impact of AI at the moment, with some noting its inflation risks in the short run, while some also said AI productivity increases would cancel that out. But in the end, most members agreed to hold rates at that meeting under the assumption that additional data before September would offer more clarity. And speaking of additional meetings, Chairman Warsh suggested six scheduled meetings per year to the committee, held roughly every two months, saying that would allow more information to accumulate between meetings and provide policymakers and staff with more time to consider what he called strategic policy issues. Warsh asked for input from the committee, and no decision was reached at the meeting other than there would be no changes made this year.

**Carol Massar** (3:31)
All right, Michael McKee there at the Federal Reserve. Mike, you're going to stay with us. I'm just looking quickly here in terms of market reaction. A little bit of a lift to the equity trade. I did see the S&P up about 22 points ahead of these Fed minutes. They're now up about 32 The NASDAQ 100 was just down a fraction of a point. Now it's up about two and a half points. And let's go on over to what we are seeing in terms of US. Treasury yields. And we have seen a little bit of a dip lower. So where's that two-year note right now? 418, five-year note with the yield of 435 And you've got that 10-year note with the yield of 465
Mike, interesting. First of all, six meetings by the FOMC would be too less than what's on the calendar currently.
What's sticking out here for you following the latest Fed meeting? You were there in the room, put a question to Kevin Warsh, Fed chair that many thought was really smart in terms of like, what are you watching to figure out kind of where we go next? But tell us based off of these minutes, if you got any more clarity about what the FOMC is thinking.

**Michael McKee** (4:41)
I think what the minutes show is that the committee was much more divided than people had anticipated. The counting words that they use, the adjectives for how many people were on one side or another are much more in evidence in this set of minutes than I think I've ever seen, and especially the word some and several.
It sounds like basically there were people who had opinions on a whole range of things that were expressed, which Warsh said he wants to see, but it didn't suggest at this point that they have any kind of unified view about what's going to happen in the future with inflation. They did say it's very uncertain at this time. My thought was that three weeks ago, when this meeting took place, they might have still been leaning towards the idea of a September rate cut. Now we've seen some changes to that view since then in the markets, but this was a somewhat hawkish group of people who were concerned about inflation and the fact that they didn't know what was going to happen.