Kevin Warsh will be sworn in as Federal Reserve chair on 22 May as newly released meeting minutes show policymakers entering the leadership transition with growing uncertainty over inflation and the path of interest rates.
Minutes from the Fed's 28–29 Apr meeting suggest officials were becoming less confident inflation would steadily return to the central bank's 2% target, even as concerns around employment and growth remained in focus.
Almost all participants backed holding rates steady at the April meeting. However, a larger question emerged from the board discussion: what happens if inflation remains stubborn while labour-market conditions weaken?
"The information available at the time of the meeting indicated that inflation remained elevated and had moved higher, led by a sharp increase in energy prices," reads the document. It also noted that "labor market conditions had stabilized, and real gross domestic product (GDP) continued to expand" in the US.
Inflation concerns broaden
Fed staff estimated personal consumption expenditures (PCE) inflation – the central bank's preferred gauge – rose to 3.5% in March from 2.8% in February. Core PCE was estimated at 3.2%.
While rising energy prices drove much of the increase, Fed officials revealed an increased focus on broader sources of inflation pressure.
Topics such as tariffs, supply disruptions tied to conflict in the Middle East and cost pressures linked to AI-related investment spending featured in discussions, leading some officials to question whether inflation itself could become harder to contain, according to the minutes.
"The vast majority of participants noted an increased risk that inflation would take longer to return to the Committee's 2 percent objective than they had previously expected."
Upward pressure on energy prices continued after April's meeting. US gas prices averaged about $4.53 a gallon as of 19 May, according to AAA, near their highest level since 2022 as conflict in the Middle East continued disrupting oil markets.
The minutes showed policymakers becoming more cautious about signalling the Fed's next move, stressing that decisions would continue to be made on a "meeting-by-meeting basis."
A more difficult balancing act
The minutes suggest policymakers were not yet preparing for a shift in rates but showed growing debate around future risks.
"A majority of participants highlighted... some policy firming would likely become appropriate if inflation were to continue to run persistently above 2 percent."
At the same time, officials continued highlighting downside risks to employment and economic growth – a tradeoff likely to shape the early months of Warsh's tenure.
Warsh arrives at the Fed under unusual circumstances. President Donald Trump repeatedly criticised outgoing Chair Jerome Powell and urged the central bank to lower interest rates during Powell's tenure, putting the Fed's independence under renewed scrutiny. Warsh will be taking over as the central bank confronts potentially stubborn inflation and the possibility that it may need to endure the president's wrath to hike rates to get inflation under control.
