The Federal Reserve minutes first mention the possibility of a rate hike, with significant disagreements within the committee over the direction of interest rates.

BlockBeats News, on February 19th, Wednesday, the minutes from the January 27th to 28th meeting revealed that the Federal Open Market Committee (FOMC) decided last month to keep the benchmark interest rate in the 3.50%-3.75% range, a decision supported by “almost all” policymakers. However, subsequent opinions expressed have been polarized: some officials are optimistic about the productivity surge and inflation decline brought by artificial intelligence, while others are concerned that AI investments, driven by rising asset valuations and participation in “opaque private markets,” pose financial risks.

The minutes state: “Some participants… expect that accelerated productivity growth related to technological or regulatory developments will exert downward pressure on overall inflation. However, most participants warned that progress toward the Committee’s 2% inflation target could be slower and more uneven than generally anticipated, and that the risk of inflation remaining persistently above the Committee’s target is significant.”

The minutes note that, given AI is seen as having enormous potential, risks, and uncertainties, the Federal Reserve’s decision last month to pause monetary easing was appropriate to assess the current state of the economy after a 75 basis point rate cut last year.

Only a “few” policymakers supported further action during the meeting. Federal Reserve Board member Christopher Waller and Stephen Miran both voted against, advocating for rate cuts due to concerns about potential weakness in the labor market. Additionally, opinions among the other 17 officials were divided. For example, the minutes for the first time mention that if inflation remains persistently above the Fed’s 2% target, rate hikes may be considered. Currently, inflation is about 1 percentage point above that target.

After the minutes were released, investors continued to bet that the Fed would keep policy rates unchanged until the June 16-17 meeting—which is expected to be Waller’s first meeting since taking office. Markets anticipate that both this meeting and the September meeting will each cut rates by 25 basis points. In contrast, market pricing indicates that there is no possibility of rate hikes in the foreseeable future. (Jin10)