July FOMC minutes record the Chairman's case for a six-meeting calendar

The Federal Reserve released the minutes of the 28–29 July 2026 meeting of the Federal Open Market Committee, which held the target range for the federal funds rate at 3½ to 3¾ percent, on 19 August 2026.¹² They record that “the Chairman observed that six scheduled meetings per year, held roughly every two months, would allow more information to accumulate between meetings than under current practice and provide policymakers and the staff more time to consider strategic monetary policy issues,” that he “asked for input from the Committee on these issues,” and that “no decisions regarding possible changes in the meeting schedule were made, and the Chairman indicated that any change in practice would not affect the schedule over the balance of 2026.”¹ The Chairman is Kevin M. Warsh.² The minutes confirm the 9-3 vote, with Beth M. Hammack, Neel Kashkari and Lorie K. Logan preferring a quarter-point increase, and record that the June statement had already carried the sentence “The Committee will deliver price stability,” which “almost all members agreed” should be retained.¹³ On the outlook, “many participants assessed that policy tightening would likely be necessary if inflation did not decline,” and “some participants commented that financial conditions might not currently be sufficiently restrictive to facilitate a return of inflation to 2 percent.”¹ The minutes record that the Committee’s next meeting would be held on 15–16 September 2026.¹

1. Six meetings a year would be lawful and would still be a substantial change. The Federal Reserve Act provides that “[t]he meetings of said Committee shall be held at Washington, District of Columbia, at least four times each year,” so the statutory floor sits below both the current eight-meeting calendar and the proposed six.⁴ What changes is not the Committee’s legal capacity but its cadence: each scheduled meeting is an occasion on which the target range can be moved, so six meetings would leave two fewer such occasions a year and lengthen the interval any single decision must hold to roughly two months.¹⁴ The Committee retains the power to act between meetings, and the statute’s call provision — meetings may be convened “at the request of any three members of the Committee” — does not depend on the scheduled calendar.⁴ Asked at the 29 July press conference about his forthcoming Jackson Hole speech, Chair Warsh said he wanted to “frame the big questions,” adding that “there is a tendency, especially with the proliferation of meetings and press conferences, to get caught up in the myopic,” and that what the Committee delivers on price stability “matters more” than “the decisions we make in six or seven or eight week periods.”⁵

2. The minutes’ description of the labour market was out of date before they were published. Participants “noted that payroll employment gains had strengthened this year and appeared roughly consistent with recent labor force growth.”¹ On 7 August — twelve days before the minutes were released, and nine days after the meeting — the Bureau of Labor Statistics reported that nonfarm payrolls fell by 23,000 in July, that the May figure was revised down from 129,000 to 63,000 and the June figure from 57,000 to 20,000, leaving the two months a combined 103,000 lower than previously reported, and that the average monthly gain over the prior twelve months was 34,000.⁶ The minutes are a record of what the Committee believed on 29 July, not a current assessment.¹⁶

3. The case for tightening was argued on the breadth of price increases, against an inflation rate whose overshoot is concentrated in energy. July CPI rose 0.1 percent on the month and 3.4 percent over twelve months, while the index less food and energy rose 2.5 percent over twelve months; the energy index rose 14.7 percent over the year, with gasoline up 24.6 percent and fuel oil up 39.1 percent, though in the reported month energy fell 1.5 percent and gasoline 2.9 percent.⁷ The participants who favoured a quarter-point increase “remarked that price pressures appeared broad based,” and a few of them judged that raising rates at the meeting “would likely help forestall the need for a steeper and potentially more costly sequence of tightening moves at a later stage.”¹ Separately, many participants highlighted the possibility that “continued elevated inflation rates could begin to affect inflation expectations and wage- and price-setting decisions,” and many noted that “the recent re-escalation of the conflict in the Middle East significantly clouded the inflation outlook”; the staff expected inflation to step down next year “as the effects of tariffs and the Middle East conflict wane” and to be about 2 percent in 2028.¹

4. The financial-stability discussion locates the risk in the same place as the growth. Staff characterised the system’s vulnerabilities as notable, judged asset-valuation pressures elevated, and reported an equity premium “at a level that has only been lower in recent history during the dot-com bubble”; hedge-fund leverage “remained near all-time highs across all strategies” and hedge funds’ repo and prime-brokerage borrowing “rose to record levels.”¹ Some participants “focused on vulnerabilities associated with the financing of the rapid buildout of AI-related infrastructure,” noting the risk that “major downward revisions” to the sector’s earnings outlook “might lead to a broad-based repricing of assets, generate tighter financial conditions, and create strains in financial institutions directly or indirectly exposed to the sector”; a few participants highlighted that capital spending in the sector was increasingly financed by borrowing, “including credit provided by nonbank investors or regional banks.”¹ On the balance sheet, participants said the findings of the task force would be “a useful input,” and many reaffirmed “that the primary means of adjusting the stance of monetary policy should be through changes in the target range for the federal funds rate” (see Fed monetary-policy task forces announced from June meeting).¹⁸