A growing hawkish bloc argues U.S. monetary policy remains insufficiently restrictive, while governors and other officials still favor holding rates steady, underscoring a clear split over the policy path.
Five of the Federal Reserve's 12 regional bank presidents have publicly signaled support for raising interest rates after the July policy meeting, adding to signs of a more hawkish turn inside the central bank. Cleveland Fed President Hammack said she leaned toward a hike at the latest meeting because the current policy stance was "not restrictive enough." Dallas Fed President Logan said core inflation remained near 2.5% even after stripping out recent shocks, supporting tighter policy. Minneapolis Fed President Kashkari said policymakers should tighten gradually as they gather more inflation and employment data, arguing that "small consecutive moves" are preferable to being forced into larger action later. Kansas City Fed President Schmid said strong U.S. demand and investment show policy has not yet become restrictive enough and that tighter settings are needed to return inflation to the Fed's 2% target. St. Louis Fed President Musalem also backed a rate increase and warned that a recent sell-off in the U.S. Treasury market reflected concern about the Fed's credibility, with ongoing supply shocks broadening price pressures on businesses and households. The shift means 5 of the Fed's 12 regional presidents have now clearly indicated a bias toward rate hikes. At the same time, 7 Fed governors, New York Fed President Williams and Philadelphia Fed President Paulson had previously supported keeping rates unchanged, highlighting an evident internal divide over the future path of policy.