The minutes from the Federal Reserve's June monetary policy meeting revealed that a minority of officials saw a case for raising interest rates, though they ultimately supported the decision to hold rates steady.

Released on Wednesday, the minutes from the June 16-17 Federal Open Market Committee (FOMC) meeting indicated that policymakers' concerns about inflation had intensified, while worries about the labor market had eased slightly.

The minutes stated, "Participants generally judged that the information received between meetings suggested that upside risks to price stability remained elevated, while downside risks to employment had moderated somewhat."

The FOMC voted unanimously at the June meeting to maintain the target range for the federal funds rate at 3.5% to 3.75%. This was the first policy meeting chaired by Kevin Walsh. The post-meeting statement noted that inflation remained elevated and the central bank remained committed to achieving price stability.

The latest interest rate projections released after the June meeting showed that nine officials forecast at least one 25-basis-point rate hike this year, with six of them expecting at least two hikes. Another nine officials anticipated rates would remain unchanged or be cut. New Chairman Walsh, who has been critical of "forward guidance," did not submit a rate forecast.

The minutes showed the committee discussed several potential scenarios for the U.S. economy in the coming months. In a scenario where inflation moderates, most participants anticipated the Fed would "maintain the current target range for the federal funds rate, or eventually lower the target range."

However, in an alternative scenario where energy prices, tariffs, and demand spurred by artificial intelligence keep inflation high, most participants believed "further policy firming may be necessary."

This concern found support in economic data released a week after the meeting. The Fed's preferred inflation gauge, the Personal Consumption Expenditures (PCE) price index, rose 4.1% year-over-year in May, the largest increase since April 2023, driven primarily by higher energy prices due to the war in Iran. The core PCE index, which excludes food and energy, also rose 3.4% year-over-year.

Since the June meeting, oil price volatility stemming from the Middle East conflict has made the overall inflation outlook even more uncertain. Crude prices fell sharply as a ceasefire between Iran and the U.S. appeared to take hold and more ships transited the Strait of Hormuz, but prices resumed their climb this week as hostilities between the U.S. and Iran flared again.

On Wednesday morning, the U.S. President stated he believed the ceasefire was over and that the U.S. was likely to launch further airstrikes against Iran.

As of early Wednesday, investors were pricing in expectations for the Fed to raise rates one or two times this year, in increments of 25 basis points.

Fed policymakers will next turn their attention to the June Consumer Price Index report, due for release on July 14, likely focusing on inflationary pressures beyond energy. On the same day, Chairman Walsh is scheduled to testify before the House Financial Services Committee, marking his first appearance before Congress since being sworn in on May 22.