On 19 August, the US Federal Reserve published the minutes of its monetary policy meeting of 28 and 29 July, the second chaired by Kevin Warsh since he took office in May. The document confirms what the markets had already sensed since the June minutes: the committee remains deeply divided on the direction to take with key interest rates, and this division shows no signs of abating.
A vote far from unanimous
Of the twelve voting members, nine voted to keep interest rates in their current range of 3.50% to 3.75%. Three voted against, calling for an immediate hike. This is not merely a superficial disagreement: the minutes specify that the majority of participants believe a further tightening is likely necessary if inflation does not show signs of slowing down, whilst the dissenters believe that current financial conditions are not yet restrictive enough to durably curb prices.
Inflation measured by personal consumption expenditures remains the central point of friction. It stood at 4.1% in May, more than double the Fed's target, with a core component at 3.4% that is of particular concern to the committee. The conflict in the Middle East is cited several times in the document as an additional factor of uncertainty, notably through its impact on energy prices.
Warsh wants to change how the Fed communicates
Beyond the vote itself, the minutes reveal a fundamental shift in the institution's governance. Kevin Warsh proposed that the committee reduce the number of annual meetings from eight to six. No formal decision has been made, and the chairman specified that the schedule would remain unchanged until the end of 2026, but the intention is clear: to communicate less frequently, with shorter forward guidance that is less binding for the markets.
This is a break from the practice of recent years, where each meeting was accompanied by relatively precise indications on the expected path of rates. Since his arrival, Warsh has been intentionally discreet about his intentions, a communication strategy that itself contributes to the ambient uncertainty.
The document also mentions a technical incident that occurred between the two meetings, disrupting the settlement of certain transactions in the money markets. The committee judged that its policy of maintaining abundant bank reserves had allowed this disruption to be absorbed without systemic damage, but the topic occupied a significant portion of the discussions, alongside a broader debate on the management of the Fed's balance sheet.
Markets revise their expectations
This lack of a clear course has direct consequences on market expectations. Just a few months ago, investors were pricing in several rate cuts over the course of 2026. The consensus has shifted significantly: money markets are now pricing in the hypothesis of just a single cut over the entire year, or even a prolonged pause in key interest rates if inflationary pressures persist.
This constant reappraisal is directly reflected in currencies. EUR/USD, like all dollar-related pairs, has been trading in a higher volatility range for several weeks, with every economic data release or public statement by Warsh being scrutinised to try to guess the next step. Cryptocurrencies, often read as an advanced barometer of market sentiment on risk, have experienced similar fluctuations at each stage of this schedule, a sign that the Fed's uncertainty extends far beyond the US bond market alone.
The next deadline: 15 and 16 September
All eyes are now turning to the meeting on 15 and 16 September, the next one to be accompanied by new economic projections and an updated dot plot. It is on this occasion that the committee will, in theory, have to clarify its position. Until then, Kevin Warsh's speech expected at Jackson Hole at the end of August will be closely watched for any clues on the direction he wishes to take his chairmanship.
In the meantime, it is uncertainty itself that dominates, and it has a concrete cost for anyone who has a payment in dollars to make or receive in the coming weeks: a hesitating Fed mechanically translates into more pronounced and less predictable exchange rate movements, at a time when fixing a rate in advance rather than betting on the market's direction becomes particularly relevant. This is the type of situation where a forward contract, accessible via a payment intermediary like OSolto, allows you to secure the rate of a future payment today, without depending on what the committee ultimately decides in September.
FAQ
Why did the Fed not give clear guidance on rates? The committee remains divided between the risks of still-high inflation and those of an excessive tightening of monetary policy. Furthermore, Kevin Warsh has initiated a reform of the institution's communication, with intentionally shorter forward guidance.
When is the Fed's next decision expected? The next meeting with economic projections is scheduled for 15 and 16 September 2026.
Why does the Fed's uncertainty affect EUR/USD? Expectations regarding US rates directly influence the attractiveness of the dollar against other currencies. As long as investors do not know whether the Fed will hold, cut, or raise its rates, these expectations constantly readjust, which fuels volatility in the currency pair.
How can I secure a payment in dollars in this context? A forward contract allows you to fix today the exchange rate applicable to a future payment, regardless of market movements in the meantime. OSolto, a payment intermediary authorised by the ACPR and registered with ORIAS (No. 26004337), provides access to this type of solution at competitive rates close to market conditions.
