Minutes From Warsh's First Meeting Show Divided Fed

Summary

The minutes from Fed Chair Kevin Warsh's first meeting show a divided committee, with some officials making a case for raising rates while others favored holding steady. Participants flagged upside inflation risks from tariffs, supply chain issues, and AI infrastructure demand, though they noted AI productivity gains could eventually reduce inflation. The FOMC also discussed moving away from forward guidance and shortening policy statements.

• Fed minutes reveal a split FOMC, with a few officials arguing for a rate hike.
• Nine members projected at least one rate increase this year, while nine saw no moves or cuts.
• Participants judged inflation risks as tilted to the upside, citing tariffs, supply disruptions, and the Strait of Hormuz closure.
• Many participants noted AI infrastructure demand would sustain upward pressure on tech product and electricity prices.
• Some participants countered that AI productivity gains would eventually lower production costs and inflation, though the timeline is uncertain.
• The labor market was seen as stable, with moderated downside risks to maximum employment.
• A majority of participants favored shortening FOMC decision statements and moving away from forward guidance.