Fed minutes from divisive meeting show officials prepping for possible rate hike as inflation fears intensify

Federal Reserve officials’ concerns about inflation being stoked by the Iran war intensified last month, with a growing number of them saying the central bank should lay the groundwork for a possible rate hike, a sign that incoming Chair Kevin Warsh will inherit an increasingly hawkish crew of central bankers.Moreover, a majority of Fed policymakers at their April 28-29 meeting said some policy tightening may be needed were inflation to continue running persistently above the central bank’s 2% target.“To address this possibility, many participants indicated that they would have preferred removing the language from the postmeeting statement that suggested an easing bias regarding the likely direction of the Committee’s future interest rate decisions,” minutes of the meeting said.The readout of the most divided Fed policy meeting in a generation added critical detail about shifts in two blocs of Fed officials waiting to greet Warsh – a growing one wary of the inflation arising from the war in Iran and of any talk of future rate cuts, and a diminishing one still leaning toward lowering borrowing costs.The main culprit for the further hawkish drift among policymakers was – again – the inflation pressures that have been aggravated by the US-Israel-led war against Iran.The nearly three-month-old conflict has driven up energy prices and fanned cost pressures across a widening array of goods and services.The minutes showed that April’s meeting – the last chaired by Jerome Powell – was the second in a row to feature more policymakers feeling a rate hike could be appropriate if inflation were to remain above target than at the immediately prior policy gathering.Warsh, who says he relishes a “good family fight” and has himself laid out arguments in favor of lower interest rates, will be sworn in as Fed chair at a White House ceremony hosted by President Trump, who appointed him and who has been explicit in his demands for deep rate cuts...