Federal Reserve officials indicated at their last meeting that they would need to raise interest rates soon unless there was more progress on bringing down inflation, minutes released Wednesday showed.

"Many participants assessed that policy tightening would likely be necessary if inflation did not decline," stated the summary of the meeting, held July 28-29. "Some participants commented that financial conditions might not currently be sufficiently restrictive to facilitate a return of inflation to 2 percent."

Ultimately, the Federal Open Market Committee voted 9-3 to keep the federal funds rate targeted in a range between 3.5%-3.75%, where it has been all year. The overnight borrowing rate serves as a guidepost for a variety of consumer debt including mortgages, credit cards and auto loans.

Those who voted against the decision favored a quarter percentage point increase. Minutes indicated that the dissenters "judged that doing so would likely help forestall the need for a steeper and potentially more costly sequence of tightening moves at a later stage."

Each of the three "no" votes was regional presidents – Beth Hammack of Cleveland, Lorie Logan of Dallas and Neel Kashkari of Minneapolis.

Since the July meeting, data releases mostly have shown modest price increases on a monthly basis, though the major indicators all have inflation well above the Fed's 2% target. The central bank's primary forecasting data point, the personal consumption expenditures price index, actually saw a 0.1% decline for June, though the annual rate was still at 3.7%.

At the same time, the employment picture has softened.

Nonfarm payrolls fell by 23,000 in July even as the unemployment rate dropped to 4.1%, the latter primarily due to a shrinking labor force. Fed officials mostly have said they are more concerned with inflation than the labor market, though that was before the most recent data.

Fed Chairman Kevin Warsh has shown an inclination to be patient when it comes to rates. Markets took remarks he made in his post-meeting news conference as dovish on inflation, which in turn sent Treasury yields sharply higher.

Yields have continued to climb, particularly at the longer part of the curve. However, they tumbled Wednesday following a Treasury Department announcement that it would step up its purchases of longer-dated government debt, the part of the duration curve that has been particularly sensitive lately.

Following the recent run of inflation data, market pricing switched to an expectation for the Fed to stay on hold likely until December before it hikes again. Previously, traders had been expecting a September increase.

The summary also reported a discussion about changing the FOMC meeting schedule.

The minutes pointed out that economic indicators changed little since the June meeting. Warsh "observed" that reducing the current meeting schedule from eight per year to six, "held roughly every two months" might be productive.

Such a move "would allow more information to accumulate between meetings than under current practice and provide policymakers and the staff more time to consider strategic monetary policy issues," the minutes stated.

"The Chairman asked for input from the Committee on these issues, but no decisions regarding possible changes in the meeting schedule were made, and the Chairman indicated that any change in practice would not affect the schedule over the balance of 2026," the document said.

Also at the meeting, the board discussed "an intermeeting incident involving a disruption to transaction settlements." The minutes noted that the Fed's policy of maintaining "ample" bank reserves "helped maintain the orderly functioning of money markets in the face of this disruption."

On a related note, the committee held what appeared to be an extensive discussion of the Fed's balance sheet and its various bond holdings. Committee members said a task force Warsh has set up to examine the issue would be helpful.