Three Fed officials who voted to hike rates are warning the central bank must act now on inflation

Cleveland Fed President Beth Hammack, Minneapolis Fed President Neel Kashkari, and Dallas Fed President Lorie Logan dissented Wednesday when the Federal Open Market Committee voted 9–3 to keep the federal funds rate in a target range of 3.5% to 3.75%. All three preferred a quarter-point increase.

Hammack said she is not certain inflation will return to the Fed's 2% target without action. "In my view, now is the time for the [Federal Open Market Committee] to act to speed the return of PCE inflation to our 2 percent objective and deliver on our commitment to price stability for the American people," she said in a statement. "The longer that high inflation persists, the more challenging and costly it can be to bring it back down."

Hammack also said she sees inflation pressure originating from demand, not just supply disruptions. "Supply-side factors, including energy prices, have boosted inflation this year, but I see inflationary pressures coming from the demand side of the economy, as well," she said. Business contacts around the Cleveland district, she added, have told her that price pressures are widening rather than easing.

Kashkari argued that smaller moves taken sooner could head off the need for more aggressive action later. "In my view, a potential series of small policy moves would be better than waiting and eventually concluding that even bolder actions were necessary," he said, according to CNBC. Kashkari also contended that the Fed should not stand aside simply because inflation stems from supply-side forces, warning that a string of such shocks could cause elevated prices to become a permanent feature of the economy.

Fed Chair Kevin Warsh, who sided with the majority, stressed that the central bank has not abandoned its goal of returning inflation to the 2% target. "We have begun a new chapter, and we understand that the five-plus years of inflation above target cannot be cured in nine weeks — or by a single month of modest price decreases," he said, according to CNBC. Logan had not yet commented publicly on her dissent as of Friday morning, though CNBC reported she planned to issue an explanatory statement later in the day.

The Fed's preferred inflation gauge, the personal consumption expenditures index, fell 0.1% in June from the prior month as a brief ceasefire in the U.S.-Iran conflict pushed energy prices lower. The year-over-year PCE rate stood at 3.7% in June, well above the Fed's 2% target. Since then the ceasefire has collapsed, hostilities in the region have resumed, and the resulting climb in energy costs has renewed pressure on the Fed to act.