Fed June FOMC meeting minutes: Removes dovish bias! AI frenzy and Middle East conflict push up inflation, does not rule out another rate hike

Interest Rate Cut Hopes Dashed? Fed's June 2026 FOMC Minutes Shock Markets. Faced with a resurgence of inflation from the Middle East conflict and strong demand fueled by the AI investment frenzy, the Fed unanimously voted to hold the benchmark rate steady at 3.50%–3.75%. Further alarming markets, the authority has officially removed the "easing bias" from its statement and signaled that further rate hikes may be necessary if inflation remains elevated.

(Previous Summary: No July Rate Cut Promise! New Fed Chair Kevin Warsh's International Debut: "Inflation Too High," Strong Pushback Against Trump's Interference) (Background: US May PCE Inflation Rebounds to 4.1%, a Three-Year High! Consumption and Income Surprisingly Strong, Rate Cuts Nearly Hopeless)

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• Inflation Expectations Soar! The Dual Blow of Middle East Conflict and AI Frenzy
• Removing Easing Bias, Fed Hints at Possibility of Another Rate Hike
• Labor Market Solid, AI Becomes a Double-Edged Sword for Economic Expansion

Under the dual assault of global geopolitical turmoil and tech frenzy, US monetary policy is facing a critical hawkish turning point.

According to the minutes of the June 16-17, 2026, Federal Open Market Committee (FOMC) meeting released on the Federal Reserve's official website, the 12 voting members, led by current Chair Kevin Warsh, voted unanimously 12-0 to keep the federal funds rate target range unchanged at 3.50%–3.75% and maintain a policy of ample bank reserves.

However, these minutes released a highly alarming signal for markets: the Fed's concern over inflation has significantly intensified, and the policy stance is shifting from the previous "dovish bias" to "neutral with a tightening bias."

Inflation Expectations Soar! The Dual Blow of Middle East Conflict and AI Frenzy

The economic assessment in the minutes shows signs of a renewed uptick in US inflation. Data indicates that the April PCE (Personal Consumption Expenditures) price index rose 3.8% year-over-year, with core PCE at 3.3%; estimates for May worsened further, with the headline index expected to climb to 4.1% and the core index to 3.4%, far above the Fed's 2% long-term target.

Committee members directly identified three primary culprits for the inflation rebound: first, the energy supply shock from the Middle East conflict (especially the Hormuz Strait crisis); second, cost increases due to tariff policies; and finally, strong private final demand driven by the artificial intelligence (AI) investment boom. While most officials expect inflation to decline as supply shocks ease, they also strongly warned that the "upside risks remain high" currently, and if inflation persists at elevated levels, it could alter corporate wage and price-setting behavior.

Removing Easing Bias, Fed Hints at Possibility of Another Rate Hike

In the discussion on monetary policy, the Fed took concrete actions to change market expectations. In the post-meeting statement, the authority formally removed language implying a "dovish bias", instead adopting a tougher stance stating it "is committed to achieving price stability."

Regarding the future policy outlook, members' estimates diverged. While most believed the authority could maintain the status quo or begin cutting rates if inflation subsides smoothly, the minutes clearly state that if inflation remains high due to factors such as AI demand, the Middle East conflict, or tariffs, the Fed "may need to resume policy firming (rate hikes)" . According to market pricing data disclosed in the meeting, affected by term premiums, the market has even begun pricing in a scenario where the Fed might hike rates once by mid-2027.

Labor Market Solid, AI Becomes a Double-Edged Sword for Economic Expansion

Despite soaring inflation pressures, the US real economy continues to show strong resilience. The minutes show that the US unemployment rate remains stable at 4.3%, the long-run equilibrium level, nonfarm payrolls are growing steadily, and wage growth, while moderating, remains solid. Additionally, second-quarter GDP expanded robustly, and the S&P 500 Index surged nearly 6%, led by AI tech stocks.

Fed officials acknowledged that AI-related investments, including data centers and high-tech equipment, are a key pillar supporting the current economic expansion. In the long run, AI will significantly boost labor productivity, but these positive effects will take time to materialize; in the short term, massive capital expenditure undoubtedly exacerbates current inflationary pressures. Against the complex macroeconomic backdrop of "high inflation, stable employment, strong growth," the Fed declared it would be entirely data-dependent going forward, meaning that cryptocurrency and US stock markets are poised for extremely high volatility in the coming months.