Fed Minutes: Rate Hike Is Back on the Table | S3 E147 | 05-20-26

The Federal Reserve's April meeting minutes, released today, show a committee growing more uncomfortable with inflation. The language shifted from "somewhat elevated" to simply "elevated," and three members pushed to signal that the next rate move could be a hike, not a cut.
This matters for anyone watching their portfolio right now. The market has already adjusted, pricing in one rate hike before the end of 2026. That is a sharp reversal from where expectations stood just a few months ago when the Fed was still talking about cuts.

In this episode, Megan covers:

• Why the Fed's word change on inflation from "somewhat elevated" to "elevated" sends a real signal
• The 8-to-4 vote and why four dissenters is the most since October 1992
• What three committee members wanted to say openly about a potential rate hike
• Why one member still wanted a rate cut, and what that division tells us
• How the labor market assessment shifted to "stabilizing but still fragile"
• What to watch for at the June meeting, including the Fed's updated economic projections and Kevin Warsh's first meeting as Fed chairman

If you're trying to make sense of where interest rates are headed and what it means for your money, this episode is worth five minutes of your time. 

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For a history of all Markets with Megan episodes, visit: https://marketswithmegan.FM

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https://youtu.be/XxAowEnS6po

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Transcript

Inflation Returns To Center Stage

Megan Horneman 0:00

Well, the Fed continues to reiterate what we heard in their meeting on April 29th when they discussed the concern that they have around inflation. It's Wednesday, May 20th, and this is Markets with Megan. If you like this podcast, you can subscribe, hit the alarm bell, share it with your friends, family, colleagues, anybody who may be interested in that economic data that we see on a regular basis and what does it mean for your investments?

Why Fed Minutes Matter

Megan Horneman 0:25

Well, this today we got the actual meeting minutes from the Fed's April meeting. Now, after the meeting that they have when they have their regularly scheduled meetings, they typically release a short statement and then a press conference. Now, shortly thereafter, a few weeks later, we get the full transcript of the meeting. And that gives us a little bit more insight into what the committee members were actually thinking.

Elevated Inflation And Rate Hike Talk

Megan Horneman 0:48

And we've really, what we saw is that this still remains very much an inflation story. The majority of the officials said that they may need to raise interest rates if inflation continues to run above 2%, which it can has continued to run above 2% and is actually climbing further. The wording um they upgrade they upgraded for the on inflation was they said it was somewhat elevated before. And in this meeting minutes, they said it was actually elevated. So I know that may seem silly that that investors focus focus on one word, but yes, when they make that type of a switch to uh their their comments, that means that they are warning you that they're starting to get worried about inflation.

Rare Dissent And Market Rate Bets

Megan Horneman 1:33

Now, this committee had um many dissenters on it, which is rare. It was a vote of eight to four. There were four dissenters. That was the most since October of 1992. Three members wanted to change the language to suggest to investors that the next move may be a rate hike. And there was one that actually still wanted a rate cut. Uh, the labor market they mentioned actually, they kind of upgraded that a bit. They said it's stabilizing, but but it still is a little bit fragile, but it is stabilizing. Now, the market, because of what we've seen with inflation, what we've seen with um bond yields, the market's pricing in now one interest rate hike before the end of this year. And this is a very different picture than what we saw when the Fed came in in their first meeting this year, where they were still looking for rate

June Projections And Leadership Change

Megan Horneman 2:23

cuts. Now, we'll get their further dot plots or the their actual economic projections at the next meeting, at their June meeting. And it'll also be the first meeting where Kevin Warsh come takes over as Federal Reserve Chairman. That's all we have today. If you'd like a history of our podcast, you can go to marketswithmegan.fm. Thank you.