Concerns about inflation increased last month among members of the Federal Reserve’s rate-setting board, as Jerome Powell presided over his final meeting as Fed chair.
Inflation worries dominated discussion during the April 28-29 meeting of the Federal Open Market Committee, newly released minutes show. Powell joined the 8-4 majority in favor of leaving the federal funds rate unchanged at the range of 3.5% to 3.75%.
The minutes show that FOMC members weighed the impacts of the Iran war in recent months, which sent oil prices soaring, raising gas prices and increasing transportation costs for American consumers.
“In addition to energy price increases, several participants noted that supply disruptions associated with the conflict in the Middle East had caused prices for fertilizer and some other non-energy commodities to rise,” the minutes state.
Policymakers’ growing concerns about inflation will complicate matters for Kevin Warsh, who is President Donald Trump’s nominee to replace Powell as Fed chair. Warsh, like Trump, has argued for lower interest rates, but the inflation picture may make it difficult to convince the FOMC to cut.
Warsh will be sworn in on Friday, following the expiration of Powell’s term as chair. Because Powell has opted to remain on the Fed’s board of governors, Warsh will take the seat of Fed Gov. Stephan Miran, who was filling in an expired term.
Inflation worries grow
Several FOMC members noted at the last meeting that inflation remains uncomfortably high for core goods, which they attributed at least in part to tariffs, the minutes show.
And, almost all of them were worried about the economic impact if the conflict in the Middle East continues for an extended period. Even after that conflict ends, they worry that oil prices will remain elevated. That price increase could also drive up costs of consumer goods, which become more expensive to transport amid higher gas prices.
As a result, the board “noted an increased risk that inflation would take longer to return to the Committee’s 2% objective than they had previously expected.”
Three members, Beth M. Hammack, Neel Kashkari, and Lorie K. Logan, objected to a statement the Fed later released suggesting an “easing bias” in future interest rate decisions.
In other words, the trio did not agree with language that suggested the Fed’s next move would be a rate cut, instead suggesting that a rate hike might be equally likely, depending on the course of the economy.
Only Miran disagreed with the rest of the panel on interest rate policy. Instead of leaving the benchmark rate unchanged at the April meeting, Miran voted for a quarter-point cut.
Warsh, who’s been supportive of lowering rates, will be sworn in in a White House ceremony Friday. Trump told reporters he’d take a hands-off approach to the Fed, even as Democrats opposed to Warsh’s nomination worried he was too close to the president.
“I’m going to let him do what he wants to do,” Trump said. “He’s a very talented guy, he’s going to be fine, he’s going to do a good job.”
