Fed minutes: Officials deeply divided over future path of US inflation

WASHINGTON (AP) — A Federal Reserve rate-setting committee agreed to keep its key rate unchanged at its meeting last month, though most officials were split over whether inflation is likely to stay elevated or whether it will cool once the Iran war winds down, according to minutes released Wednesday.

In the first set of minutes released under new chair Kevin Warsh, “many” of the 19 participants in the rate-setting committee's decisions said that the Fed's key rate would be unchanged from or slightly below its current level of 3.6% by the end of this year. But “many” also said that it would likely be higher by year-end.

The minutes underscored the deep divisions among Fed officials, particularly over the future path of inflation. The policymakers generally expected inflation would decline as gas prices cooled and the effect of tariffs faded. Yet many officials also worried that massive investment in the artificial intelligence buildout would keep inflation elevated by lifting prices for semiconductors and other technology goods.

Warsh was appointed by President Donald Trump earlier this year to replace Jerome Powell, whose term ended in May. Trump had repeatedly criticized Powell for not reducing borrowing costs quickly enough, but for now there's little sign Warsh is moving to cut rates. Powell, meanwhile, is still on the Fed's policymaking committee, serving a term as a Fed governor that lasts until January 2028.