Minutes of the Federal Open Market Committee, July 28–29, 2026

… <p>In their discussion of financial stability, some participants focused on vulnerabilities associated with the financing of the rapid buildout of AI-related infrastructure. These participants observed that high equity valuations of AI-linked firms reflected favorable assessments of the sector's long-term earnings outlook. They noted the risk that major downward revisions to those assessments might lead to a broad-based repricing of assets, generate tighter financial conditions, and create strains in financial institutions directly or indirectly exposed to the sector. A few participants highlighted the increased degree to which capital spending in the AI sector was being financed by borrowing, including credit provided by nonbank investors or regional banks. In commenting on the private credit sector, a couple of participants noted that activity had slowed recently and that developments in private credit warranted close monitoring. A couple of participants considered vulnerabilities associated with the business sector and noted that holders of corporate debt might face difficulties if firms were to experience financial stress on a large scale. A couple of participants observed that banks were a source of resilience in the financial system and emphasized that, for this situation to continue, banks needed to remain well capitalized. A couple of participants discussed ways in which episodes of price volatility in the market for U.S. Treasury securities could adversely affect the financial system or ways to reduce the likelihood of such events. A few participants stressed the importance of addressing cybersecurity risks associated with rapidly advancing AI-related technologies. A couple of participants considered an intermeeting incident involving a disruption to transaction settlements and noted that the Federal Reserve's ample-reserves regime had helped maintain the orderly functioning of money markets in the face of this disruption.</p> <p>In their consideration of monetary policy at this meeting, most participants supported maintaining the current target range for the federal funds rate. Participants generally thought that the information that would accumulate in the intermeeting period could provide more clarity, and correspondingly reduce uncertainty, about the inflation outlook. Participants generally observed that economic activity had continued to expand at a solid pace and that labor market conditions appeared stable. Participants noted that inflation remained elevated relative to the Committee's 2 percent objective, in part reflecting price increases associated with supply shocks in certain sectors, including energy. Several participants favored an increase of 25 basis points in the target range at this meeting. These participants remarked that price pressures appeared broad based and judged that the Committee should adopt a more restrictive policy stance to meet its commitment to achieving its price-stability and maximum-employment goals on a sustained basis.</p> …