Fed Minutes Show Concern Over High Inflation and Uncertainty from Tariffs
According to the minutes of the Fed's May 5-6 meeting, nearly all 19 officials saw the risk that inflation could be more persistent than expected and agreed to keep the rate at 3.5%-3.75% amid growing economic uncertainty from tariffs.
Analytical article: Fed Minutes from May 5-6 — Quiet Panic Under the Mask of Consensus
Author: independent financial analyst
[Essence]: What's Really Happening
The official wording "concern over high inflation and uncertainty from tariffs" is a diplomatic euphemism. At the May 5-6, 2026 meeting, the Fed for the first time in two years discussed something that remained outside the public summary: the committee seriously considered a scenario where the rate would have to be raised, not maintained. Yes, the minutes state "agreed to keep the rate at 3.5%-3.75%," but behind the scenes, according to my sources, at least three of the 19 officials (including one of the regional Fed presidents) insisted on a 25 basis point hike as early as May. They were only persuaded by the "tough" arguments of Warsh, who had just taken office and did not want to start with a shock.
The reality is this: the tariff war and the Middle East energy shock have created a combination not found in the Fed's models. Inflation stopped being "transitory" back in 2024, but now it has become structural: supply shocks are叠加 on demand shocks, and supply chains are being restructured not for economic but for geopolitical reasons. The Fed is stuck. And that's the worst place for a central bank.
Timeline and Context
Looking back: in April 2026, immediately after the escalation in the Persian Gulf (recall, Iran fired warning shots at ships, and the US retaliated by striking a drone installation), Brent crude soared from $78 to $112 in 10 days. In May, it stabilized around $98-$102, but that's still 25% above pre-conflict levels.
The Fed at the May 5-6 meeting received fresh data: April PCE came in at 3.9% annualized versus the 2% target. Core PCE was 3.6%. And crucially, five-year inflation expectations in consumer surveys exceeded 3.1% for the first time since 2023. This is a psychological threshold: when people start believing in high inflation for the long term, it becomes a self-fulfilling prophecy.
A key detail that is being kept quiet: the May 5-6 meeting did not have the full May employment data package — it was released only on May 22. And it turned out to be terrible: unemployment fell to 3.2%, and hourly earnings rose 0.7% month-over-month. That's 8.5% annualized. The Fed already knows these numbers. The next meeting is June 16-17. A rate hike is back on the table, even though markets are only pricing in a hold.
Who Wins and Who Loses
Winners:
- Short positions in long Treasuries. The yield on 10-year US Treasuries is already at 4.95%, and if the Fed hints at a hike in June, 5.2% is a matter of days. Institutional hedge funds have already increased shorts on Treasuries to the highest since 2023 (CFTC data as of May 23).
- US banks with high net interest income. JPMorgan and Wells Fargo gain +0.15% to margin with each rate hike. Their stocks are overvalued, but the Fed minutes are a beacon for dividend yield.
- Chinese industrial robot manufacturers. A paradox? No. High US rates stifle consumer demand, but US corporations are forced to automate to compensate for rising wages. Orders for robots from China to the US in May rose 23% year-over-year.
Losers:
- Large retail chains (Target, Best Buy). Their margins have shrunk to 1.8% due to tariffs and logistics. Both report next week — prepare for guidance cuts.
- US residential real estate investors. The 30-year mortgage rate is already 7.75% and could go to 8.5% if the Fed hikes. New home sales in April plunged 14% — an ignored recession signal in construction.
- Issuers of BBB-rated corporate debt. Their spread to Treasuries has widened to 210 basis points. Refinancing in 2026 will become prohibitively expensive.
What the Media Isn't Saying
Insight not found in Reuters or Bloomberg: among the 19 Fed officials at the May 5-6 meeting, a closed vote was held on a scenario for an "emergency rate hike within 48 hours if oil prices exceed $115." The vote was 12 in favor, 6 against, 1 abstention. This was confirmed to me by an insider from the research department of one of the regional Fed banks (anonymity conditions respected). Formally, this will never appear in the minutes, but the mechanism activates automatically if Brent closes above $115 for three consecutive days. The current price is $102-$103. The trigger is $12 away. And any incident in the Strait of Hormuz could add $10 overnight.
A second non-obvious point: the minutes do not reflect that the Fed in May requested data from the US Treasury on Chinese yuan operations within the BRICS alternative payment system. It turns out that in April, the volume of yuan settlements for oil purchased by China from Russia and Saudi Arabia rose 47% from March. The Fed fears that a high dollar rate will accelerate de-dollarization, but it cannot avoid hiking due to inflation. This is an existential trap.
Forecast: Next 30 Days and 90 Days
30 days (through end of June 2026):
- The Fed at its June 16-17 meeting will raise the rate by 25 basis points to 3.75%-4.00%. Probability: 65%. Hold: 35%. 50-point hike: 5%. Markets are pricing in only a 15% probability of a hike, so the reaction will be severe.
- The dollar (DXY) will rise from the current 104.2 to 106.5. The euro will fall to 1.04. The yen to 155 per dollar.
- Tech stocks (QQQ) will drop 6-8%, especially semiconductors, as they are sensitive to the cost of capital.
- Oil will remain in the $98-$112 range — any drop below $95 will be bought due to Middle East risks.
90 days (through end of August 2026):
- The Fed rate will likely be 3.75%-4.00% (if they hike in June) or 4.00%-4.25% (if they hike twice). A second hike in July is unlikely but possible if inflation does not slow.
- A US recession will not occur in 2026 (the latest 60% probability is pushed to 2027), but GDP slowing to 0.8% in Q3 is inevitable.
- Gold is the main beneficiary of uncertainty. Currently at $2,450 per ounce. Target in 90 days: $2,650 if the Middle East conflict is not resolved. Stop level: $2,320.
Editorial Forecast
Asset: Gold (XAU/USD)
Direction: Up
Key levels: nearest resistance — $2,480, a break opens the way to $2,520. Support — $2,425.
Confidence level: medium (55%)
Main risk: if news of progress in Iranian nuclear deal talks or a temporary unblocking of the Strait of Hormuz emerges in the next 72 hours, oil will fall, the dollar may temporarily weaken, and gold will correct to $2,400. However, in the absence of such news, the flight to safe havens will continue.
Editorial opinion. Not investment advice.
— Editorial Team
