Fed Minutes Show Some Officials Weighed Rate Hike as AI Spending Adds Inflation Risk

Some Federal Reserve officials raised the possibility of an interest-rate increase as they worried about inflation risks stemming from Middle East tensions and higher energy prices.

Minutes of the June Federal Open Market Committee meeting, released by the Fed on July 8, showed participants judged upside risks to inflation remained high, while the risk of labor-market weakening had eased somewhat, according to Yonhap News.

Some officials said supply shocks affecting the labor market and energy prices provided grounds to raise the target range for the benchmark rate. All participants ultimately agreed to keep the benchmark rate unchanged at 3.50% to 3.75%.

Officials expected inflation to remain elevated in the short term before gradually slowing as the effects of tariffs and higher energy prices fade. They also discussed the possibility that elevated inflation could persist for longer.

Increased investment in artificial intelligence was also identified as a factor affecting inflation. Most participants said strong demand for AI infrastructure could keep price pressures elevated.

The meeting was the first FOMC gathering chaired by new Fed Chair Kevin Warsh. Participants also broadly agreed on scaling back forward guidance, the practice of signaling the future policy path in advance.

Many participants saw advantages in making the FOMC statement more concise, and most supported removing language that signals the future rate path. That would leave the Fed more focused on incoming economic data and inflation trends when setting policy direction.

Kim Yeon-ji, Hankyung.com reporter kongzi@hankyung.com