By Matt Grossman

Two Fed officials said they are worried the central bank's policy statement this week was too dovish, underscoring that incoming Fed chair Kevin Warsh may face a tough path if he tries to bring interest rates lower.

In separate statements, Cleveland Fed President Beth Hammack and Minneapolis Fed President Neel Kashkari both said that they wanted the Fed to indicate that its next interest-rate move could be either a hike or a cut. Both cited concerns about a long stretch of elevated inflation, now exacerbated by higher oil prices amid the war in Iran.

"If the Strait of Hormuz remains closed, it is hard to see how oil, gas and other important commodities produced in the Middle East could find alternative routes to market," Kashkari wrote in a statement. He added: "I believe the FOMC should offer a policy outlook that signals that the next rate change could be either a cut or a hike, depending on how the economy evolves," referring to the Fed's policy committee by its acronym.

Hammack and Kashkari were joined by a third official, Dallas Fed President Lorie Logan, in objecting to an innocent-looking phrase in the Fed's policy statement that nonetheless has served as a powerful signal to investors.

After recent meetings, the Fed has referred to "the extent and timing of additional adjustments" to interest rates. Because the Fed's most recent rate move, in December, was a cut, that language has been taken to mean that the Fed's next move would most likely be another cut.

Amid a long stretch of elevated inflation, that isn't the right guidance, Hammack said. "I see this clear easing bias as no longer appropriate given the outlook," she said.

Pushback from three officials against the possibility of further cuts signals that Warsh would face challenges steering the committee toward lower rates early in his tenure.

This item is part of a Wall Street Journal live coverage event. The full stream can be found by searching P/WSJL (WSJ Live Coverage).

(END) Dow Jones Newswires

May 01, 2026 08:35 ET (12:35 GMT)

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