The Fed is divided. But its ‘hawks’ are likely to prevail and face Trump’s wrath

July 9, 2026 — 12:08pm

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Minutes of last month’s Federal Open Market Committee meeting show that, in Kevin Warsh’s first meeting as the Donald Trump-appointed chairman of the US Federal Reserve Board, active dissent among the committee’s members may have disappeared, but division hasn’t.

In recent Fed meetings, the committee had shown an increasing split between the Fed officials over whether to hold, increase or cut the Fed’s policy rate in the face of increased inflation and amid intense pressure from Trump to lower US interest rates.

At the June meeting of the Fed’s Open Market Committee (the FOMC), there was unanimous agreement that (a) the rate should remain on hold and (b) the “easing” bias inserted into previous Fed statements, which was one source of the dissent, should be excised.

The minutes, however, did show a major divergence within the officials’ thoughts about the future.

“Many” of the 19 voting members of the committee thought the federal funds rate (akin to the Reserve Bank’s cash rate) would remain at, or be slightly below, its current range of 3.5 per cent to 3.75 per cent by the end of the year.

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But, “many” other, more “hawkish”, participants in the meeting thought the rate would be above the current targeted range at year-end.

If you look at the reasoning behind that divergence of views, it would seem the likelihood is that the second group – those who expected the Fed would need to lift its policy rate this year – will be proven right.

The FOMC considered a range of scenarios for the way the US economy might evolve and what they might mean for monetary policy.

One was where the inflation pressures stemming from Trump’s past imposition of tariffs, the higher energy and input costs flowing from the war in the Middle East and the impact of the boom in artificial intelligence abated or, in........

© Brisbane Times