Fed officials see possible 2026 rate hikes as U.S. inflation stays elevated

Federal Reserve officials left the federal funds rate unchanged at 3.5% to 3.75% at their June 16-17 meeting, but the minutes released July 8 and the Fed’s monetary policy report published July 10 both showed concern that inflation could remain above the 2% target well into 2027. The report said inflation accelerated further in the spring and highlighted three main drivers: tariffs, supply disruptions and energy pressures tied to the Iran conflict, and heavy artificial-intelligence investment that is expected to push 2026 capital spending toward $1 trillion. Committee members stopped short of signaling imminent action, but the minutes pointed to persistent inflation risks and reinforced a higher-for-longer policy stance. Elevated rates continue to shape broader risk appetite because yield-bearing traditional assets become more competitive when policy rates remain above 3.5%.