Fed officials weigh rate hikes if inflation stays above 2% target

Federal Reserve officials discussed the possibility of raising interest rates again if inflation remains above the 2% target, according to minutes from the late January meeting released Wednesday. Several participants indicated they would support upward adjustments to the federal funds rate if inflation stays elevated.

The Fed began cutting rates in September 2024, bringing borrowing costs down from 4.5%. US inflation now stands at 2.4%, up 0.2% in January and still above the central bank's 2% goal.

Some FOMC members judged it appropriate to hold the policy rate steady for some time. Others warned that progress toward the 2% inflation objective might be slower and more uneven than generally expected. The committee signaled additional policy easing may not be warranted until there was a clear indication that disinflation was firmly back on track.

Two Federal Reserve governors—Federal Reserve Governor Stephen Miran and Federal Reserve Governor Christopher Waller—voted against holding rates steady at the January meeting and pushed for another 25 basis point cut. Miran argued publicly that the current policy stance risks slowing US growth and rates may be tighter than necessary.

CME futures markets show traders assign a 94% probability that rates will remain unchanged at the next Fed meeting. Higher rates typically hurt crypto and other risk assets because safer investments like Treasury bonds offer better returns without volatility. The minutes did include a conditional path for further cuts: if inflation declines in line with expectations, rate reductions would likely be appropriate. The next FOMC meeting is scheduled for March 18, 2026.