On February 18th (local time), the Federal Reserve released the minutes of its January 2026 monetary policy meeting, which clearly showed that differences on monetary policy within the bank have further intensified, with three major positions forming a confrontation, bringing sustained uncertainty to the global financial market. The meeting maintained the target range of the federal funds rate at 3.5% to 3.75% by a vote of 10 in favor and 2 against, but internal differences have become the core focus of market attention.

From the perspective of divergent positions, three major camps have formed within the Federal Reserve: the dovish camp, represented by Federal Reserve Governors Stephen Milan and Christopher Waller, advocates an immediate 25-basis-point interest rate cut. Waller later warned that the current excessively high interest rate level may lead to a deterioration in the labor market; the neutral maintenance camp is the current mainstream, believing that interest rates should be temporarily maintained unchanged until the trend of inflation cooling is clear, waiting for more economic data to verify the recovery momentum; hawkish officials advocate that the policy should have two-way flexibility, clearly proposing to retain the possibility of interest rate hikes when inflation remains high, and continuing to be vigilant about the risk of inflation rebound.

The core of the differences stems from the differentiated judgment on key economic indicators. In terms of the labor market, most participants acknowledged signs of stabilization, but some officials warned that sluggish recruitment demand may lead to a sharp rise in the unemployment rate; in terms of inflation, officials generally expect inflation to fall within the year, but there are significant differences on the pace of decline. Some officials are optimistic about the inhibitory effect of artificial intelligence on improving productivity on inflation, while most officials are worried that the process of inflation converging to the 2% target will be slower.

In addition, the replacement of the Federal Reserve’s leadership has further increased policy uncertainty. U.S. President Trump has nominated former Federal Reserve Governor Kevin Warsh as the next Chairman of the Federal Reserve. His clear dovish stance on interest rate cuts stands in sharp contrast to the hawkish tendencies of some current regional Federal Reserve presidents. Market expectations are that the Federal Reserve’s next interest rate cut is likely to be in June, but the actual timing of implementation will still be affected by factors such as inflation, employment and leadership replacement, and global capital flows will continue to be dominated by the game of policy expectations.