The Federal Reserve issued an 11-word warning that years of above-target inflation "could begin to affect inflation expectations and wage- and price-setting decisions." The warning appeared in minutes from the Fed's meeting under new Chair Kevin Warsh, where the target rate was held at 3.5% to 3.75%. The Fed fears that if Americans come to permanently expect higher prices, a wage-price spiral could take hold, similar to the 1970s when Paul Volcker had to push rates to 20% and trigger a deep recession to restore credibility. While inflation has eased from 4.2% in May to 3.5% in June, the risk remains that delayed action could force sharper rate hikes later, potentially destabilizing an economy reliant on cheap debt for AI infrastructure and private credit. History suggests acting while expectations are still anchored is far less costly than fixing entrenched inflation.