The Federal Reserve is keeping a September rate hike on the table, meaning the same central bankers who inflated your grocery bill now want working Americans to pay more to borrow money to fix the problem they created.
Minutes from the July FOMC meeting released Wednesday reveal that "many participants" believe more rate hikes are coming to get inflation back to the Fed's 2 percent target, despite recent data showing price increases slowing. Three officials already dissented in favor of a quarter-point hike at the July meeting — the largest single-direction bloc dissent on the fed funds rate since September 2016. Reuters reports that "several participants favored an increase of 25 basis points" while "many" said tightening will "likely" be needed.
In Fedspeak, "several" is less than "many," and "some" sits between them. As NerdWallet noted, the deliberate vagueness means "your guess is as good as mine what those words indicate." What's not vague: the Fed broke this, and you're paying for it.
Governor Christopher Waller said last month higher rates could be required in the "near term," and Philadelphia Fed President Anna Paulson indicated she's still "open" to raising rates. Both are voting members this year. Reuters calculates the 9-3 July vote could become a 7-5 split in September.
KPMG U.S. chief economist Diane Swonk posted on X that the softer inflation and jobs data are "look-through events" and "September is still a live meeting for a hike."
Meanwhile, mortgage rates ticked down slightly to 6.51% APR on a 30-year fixed after the Treasury Department announced increased purchases of long-term bonds, according to NerdWallet. But that relief is fragile. Any September hike would push borrowing costs higher for homebuyers and small businesses alike.
Inflation did slow slightly — CPI fell from 3.5% in June to 3.4% in July, still well above the 2% target. The Fed's preferred measure, the PCE index, comes next week. But Fed officials warned the re-escalation of war in the Middle East has "significantly" clouded the inflation outlook.
Interest-rate futures put the odds of a September hike at roughly one-in-three — not negligible. Historical precedent cuts the other way: Reuters notes the Fed has hiked rates after a weak jobs report only twice in the last 89 such meetings, dating back decades. The political calendar also looms — a hike in October, days before November midterms, would invite accusations of political interference.
So the central bank that printed trillions now sits in a box of its own making, debating whether to squeeze borrowers harder or wait and risk inflation staying sticky. Either way, the people who caused the damage aren't the ones who'll feel the pain.
The question isn't whether the Fed will hike. It's whether anyone in Washington will ever hold the people who inflated the dollar accountable — or if working Americans will just keep paying for the privilege of being governed by an unelected committee reading tea leaves.
