'Many' Fed officials think higher rates will be needed if inflation stays high

WASHINGTON (AP) — Many Federal Reserve officials think the central bank will have to lift its key short-term interest rate in the coming months if inflation doesn't subside, minutes of the Fed's meeting last month showed.

The minutes of the July 28-29 meeting, released Wednesday, don't provide specifics on how many of the 19 officials supported higher rates. Only 12 of the 19 policymakers vote on the outcome. Officials voted 9-3 at the meeting to keep their key rate unchanged at about 3.6%.

Inflation has since showed some signs of cooling , though gas prices have rebounded this month on renewed hostilities in the Middle East. Wall Street investors now expect the Fed to remain on hold at its next meeting in September and potentially lift rates in December, though that outlook could change.

Fed officials were heavily focused on the threat of stubbornly elevated inflation at last month's meeting.

“Participants judged that their inflation outlooks were highly uncertain and that inflation risks were skewed to the upside,” the minutes said. “Many participants assessed that (higher rates) would likely be necessary if inflation did not decline."

New Fed chair Kevin Warsh also unnerved Wall Street investors last month by providing little guidance at a July 29 news conference on what the Fed's next steps might be, threatening the Fed's inflation-fighting credibility. Interest rates, or yields, on longer-term Treasury securities, which had already risen before the meeting, moved higher.

Warsh has said he will provide less of what he calls “forward guidance” about the Fed's plans, which he sees as limiting the central bank's policy options even if economic circumstances change. At the news conference, Warsh didn't fully commit to boosting the Fed's key rate even if inflation stayed persistently high.