Fed Minutes Reveal Split Over Rate Hike

On August 19, the Federal Reserve released the minutes of its July policy meeting. The Federal Open Market Committee (FOMC) voted 9-3 to keep the benchmark federal-funds rate in its 3.5 %–3.75 % range, while three regional presidents—Beth Hammack of Cleveland, Lorie Logan of Dallas, and Neel Kashkari of Minneapolis—advocated a quarter-point increase.

CNBC

The July meeting followed a year in which the Fed held rates steady after three cuts in late 2025. Inflation has remained above the 2 % target, with the personal-consumption-expenditures price index showing an annual rate of 3.7 % despite a 0.1 % monthly decline in June. The labor market, once a pillar of the Fed’s stance, showed mixed signals: non-farm payrolls fell by 23,000 in July, yet the unemployment rate slipped to 4.1 % as the labor force contracted.

CNBC

• Vote: 9-3 to hold; dissenters Hammack, Logan, Kashkari favored a 0.25 % hike (Bloomberg, Briefs, CNBC).

Bloomberg

• Inflation: 3.7 % annual, 0.1 % monthly decline in June.

CNBC

• Jobs: July job loss of 23,000; unemployment 4.1 % (Briefs, CNBC).

Fed Minutes Show Deep Split on Rate Hikes

• Bond yields: Longer-dated Treasury yields rose to near a two-decade high after the minutes.

Bloomberg

• Market expectations: Traders’ probability of a September hike fell from over 70 % in July to about 36 % on Wednesday, while a December hike now appears more likely.

CNBC

The minutes recorded that no decision on the schedule was made and that any change would not affect the remainder of 2026.

CNBC

Market pricing of a September rate hike diverged across sources: Bloomberg noted a drop to 36 % probability, while other commentary referenced an earlier “over 70 %” likelihood. The minutes do not quantify the exact probability, leaving the precise market expectation ambiguous.

CNBC

• “A more hawkish internal debate could keep the expected policy path elevated, but contained inflation and an earnings yield already close to the Treasury yield should limit how far long rates can rise without causing a broader repricing of risk assets,” — Florian Ielpo, head of macro and multi-asset portfolio manager at Lombard Odier Investment Managers

Reuters

The Fed’s next policy meeting is slated for September, with traders now pricing a possible hike in December. Chairman Warsh is expected to deliver his first major speech at the Jackson Hole symposium in Wyoming later this month, where he may address the meeting-schedule proposal and the outlook for inflation-driven tightening.

Bloomberg