Three US Federal Reserve policymakers who broke ranks with the central bank`s decision to leave interest rates unchanged this week defended their stance on Friday, arguing that raising borrowing costs now would help prevent inflation from becoming more deeply entrenched.
The Federal Reserve on Wednesday kept its benchmark interest rate unchanged at 3.50%–3.75% for a fifth consecutive meeting.
However, three of the 12 members of the rate-setting committee voted in favour of a 0.25 percentage-point increase—an unusually high number of dissenting votes that underscored divisions within the central bank over the inflation outlook.
Cleveland Fed President Beth Hammack, one of the three dissenters, said inflation remained a significant concern despite the decision to hold rates steady.
"Inflation has been too high for too long," Hammack said, warning that delaying action could make it more difficult and costly to bring price growth back to the Fed`s 2% target.
US inflation has accelerated in recent months, driven by higher energy prices linked to President Donald Trump`s military campaign against Iran, while lingering supply disruptions, tariff policies and strong demand tied to the artificial intelligence boom have also added to price pressures.
Minneapolis Fed President Neel Kashkari said he supported a gradual tightening of monetary policy as policymakers continued to assess incoming economic data.
"If inflation remains elevated, in my view, a potential series of small policy moves would be better than waiting and eventually concluding that even bolder actions were necessary," Kashkari said.
The third dissenting official, Dallas Fed President Lorie Logan, also defended the case for an immediate increase, saying current interest rates were not restrictive enough to slow the economy and return inflation to target.
She argued that taking modest action now would reduce the risk of more aggressive rate hikes later, adding that inflation was likely to remain above the Fed`s goal unless there was an unexpected economic shock.
The policy debate comes as new Federal Reserve Chair Kevin Warsh, who took office in May, has remained largely silent on his preferred path for interest rates despite reaffirming the central bank`s commitment to its 2% inflation target.
Warsh had previously expressed support for lower interest rates before becoming Fed chair, a position broadly aligned with President Trump, who has repeatedly urged the central bank to cut rates to boost economic growth.
His reluctance to provide forward guidance has unsettled financial markets, with yields on 30-year US Treasury bonds climbing to their highest level since 2007 following this week`s Fed meeting.
The New York Times reported on Friday that Warsh is also considering reducing the number of annual meetings of the Federal Open Market Committee from the current eight, although any change is unlikely to take effect before later this year.
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