Fed minutes: Inflation risks persist, some officials support rate hikes

The minutes from the Federal Reserve’s July 28–29, 2026, FOMC meeting indicate that inflation risks remain tilted to the upside, with some officials supporting rate hikes. The document highlights ongoing concerns about financial stability due to AI-driven investment demand and leverage. Despite maintaining the federal funds target range at 3.50%–3.75%, the Fed acknowledges that inflation is still elevated compared to its 2% target. This has led to a divided stance among officials, with some advocating for higher rates should inflation persist. The market response to these developments appears to reflect an increased probability of a rate hike in the upcoming meetings. The odds for a rate increase by the October meeting have risen to 40.5%, up from 38% the previous day, suggesting that market participants view the Fed’s stance as more aligned with tightening. Conversely, the likelihood of a rate cut scenario in the upcoming meetings remains low, with market pricing indicating less than a 1% chance of such an outcome. Concerns regarding AI valuations and financial leverage add another layer of complexity to the Fed’s decision-making process. The balance between controlling inflation ...