TLDR
- The Fed kept its benchmark rate unchanged at 3.5% to 3.75%.
- April’s FOMC meeting had four dissents, the most since 1992.
- A majority saw possible rate hikes if inflation stays above 2%.
- Fed officials said the Iran war is adding pressure through energy prices.
- Kevin Warsh will take over as Fed chair after Powell’s final meeting.
Federal Reserve officials became more cautious on inflation at their April policy meeting, with many policymakers warning that interest rates may need to rise if price pressures remain above the central bank’s 2% target.
Minutes released Wednesday showed the Federal Open Market Committee kept its benchmark rate unchanged in a range of 3.5% to 3.75%. The decision came with four dissents, the highest number since 1992, showing a rare level of disagreement inside the rate-setting body.
The minutes said a majority of officials believed “some policy firming would likely become appropriate” if inflation continues to run persistently above 2%. The discussion centered on the Iran war, higher energy prices and the risk that inflation could take longer to return to target.
Fed Keeps Rates Steady but Debate Turns Hawkish
The April 28-29 meeting was the final FOMC gathering chaired by Jerome Powell. While officials voted to hold rates steady, the minutes showed a shift away from confidence that rate cuts would be the next likely move.
Several policymakers said rate cuts may be appropriate once inflation clearly moves back toward 2% or if the labor market weakens. However, many officials wanted to remove language from the policy statement that suggested an easing bias.
We have posted the minutes from the #FOMC meeting held April 28-29, 2026: https://t.co/eFNah62zbz
— Federal Reserve (@federalreserve) May 20, 2026
Three of the four dissents came from regional Fed presidents who agreed with holding rates steady but objected to keeping wording that appeared to point toward future cuts. Another dissent came from Governor Stephen Miran, who favored a rate cut.
The Fed’s wording remained unchanged because “many” officials supported removing the easing language, but the minutes did not describe that group as a majority. In Fed communications, that distinction matters because it shows how close the committee came to changing its public policy signal.
Iran War Adds Pressure Through Energy Prices
The minutes showed that officials are closely watching the economic effects of the Iran war. The conflict has pushed energy prices higher and added cost pressure across parts of the economy.
Fed officials said the war could make inflation harder to contain. The document stated that the vast majority of participants saw a higher risk that inflation would take longer than previously expected to return to the 2% goal.
Inflation had moved closer to the Fed’s target through 2025 and early 2026. That trend has changed as energy prices rose and broader price measures moved above 3%.
Core inflation, which excludes food and energy, has also been rising. Goldman Sachs expects the Fed’s main inflation gauge to show a 3.3% annual rate for April when the data is released next week.
Markets have adjusted to the Fed’s cautious tone. Expectations for rate cuts in 2026 have weakened, while some pricing now points to the possibility that the central bank’s next move could be a hike later in 2026 or in early 2027.
Kevin Warsh Inherits Divided Committee
Kevin Warsh is set to take over as Fed chair after being selected by President Donald Trump. Trump has said he wants lower interest rates, but the minutes show that Warsh will begin with a committee divided over whether policy should ease or tighten.
Warsh has previously made arguments for lower rates, but he will need to build agreement among officials who are increasingly focused on inflation risks. Economists said reaching consensus may be difficult while energy prices remain elevated and inflation data stays above target.
Powell will remain on the Fed’s Board of Governors after leaving the chair role. His term as governor has two years left, and he has said he will stay for a period still to be determined.
