Fed minutes showed that many participants said a rate hike may be necessary

At its July meeting, Federal Reserve officials noted that they would have to raise interest rates in the near term if more substantial progress in reducing inflation is not achieved, according to minutes released on August 19.

Most participants expected inflation to decline by year-end as the impact of tariffs and the earlier rise in energy prices wanes, but many also pointed to the possibility that inflation could remain elevated for longer. The minutes said participants’ inflation forecasts were “highly uncertain,” and a renewed escalation of the conflict with Iran “clouded the outlook for inflation.” The labor market was described as stable, with labor demand and supply in balance.

Those who voted against the decision favored raising the rate by a quarter of a percentage point. The minutes said they “believed that such a step would likely help prevent the need for a sharper and potentially more costly series of monetary policy tightening measures at a later stage.”