Fed Minutes Show Most Officials Favor Another Rate Hike by Year End

Most Federal Reserve officials judged that another increase in the federal funds target range would likely be appropriate by year end, according to meeting minutes released Wednesday and reported by Cnbc. The summary of the September 15-16 gathering offered no indication of which meeting policymakers had in mind.

Officials paired that expectation with a caution: the minutes said participants approached each meeting with an open mind and that decisions at future meetings would depend on incoming data and its implications for the outlook and the balance of risks.

Also read: Bitcoin Tops $87,000 as Weak September Payrolls Cut October Fed Hike Odds

Key facts

• All participants backed September’s quarter-percentage-point increase, which raised the federal funds target range to 3.75% to 4%, according to Cryptobriefing.
• As a group, the Federal Open Market Committee projected one more hike this year and none in 2027; 16 of the 18 officials who submitted forecasts expected another increase, Cnbc reported.
• The Fed’s preferred inflation gauge showed core PCE at 3% and headline at 3.4% for August, Cnbc reported.
• Cryptobriefing cited Fed staff estimates of 3.8% headline and 3.4% core PCE inflation for August, which would become 3.6% and 3.2% under a forthcoming change to Bureau of Economic Analysis methodology.
• Treasury yields climbed roughly 35 basis points across two- to 10-year maturities between the two meetings, per Cryptobriefing.

Where the accounts diverge

The two reports describe August inflation differently. Cnbc pointed to the personal consumption expenditures price index showing core inflation at 3% and headline at 3.4%, describing both as below expectations and noting that changes to how some inputs are calculated helped. Cryptobriefing attributed higher figures to Fed staff — 3.8% headline and 3.4% core — and said the Bureau of Economic Analysis methodology change would bring those to 3.6% and 3.2%. The differing baselines matter because officials cited insufficient progress toward the central bank’s 2% target.

Cryptobriefing also reported factors Cnbc did not detail: officials pointed to higher energy prices tied to geopolitical tensions and to surging investment in AI infrastructure as sources of price pressure, with some warning the AI buildout could push demand above supply over the medium term. Business contacts reported rising costs, and some participants said companies appeared increasingly able to pass increases to consumers.

Also read: Fed watchdog finds mismanagement, no crime in $2.4bn renovation

Why it matters

Borrowing costs sit at the centre of this debate. The minutes showed officials view the labor market as close to maximum employment while growth has picked up, a combination that keeps inflation risk tilted to the upside in their reading. Several officials described the policy rate as either not restrictive or only mildly restrictive, per Cryptobriefing, a framing that supports holding a tightening bias.

Markets moved after the September meeting toward expecting a second hike at the late-October meeting, following tough inflation talk from Chairman Kevin Warsh at his news conference. More recent inflation data and comments from leading Fed officials have since made an October increase look unlikely. Warsh has not submitted a forecast since taking the position in May.

The bond market remains part of the picture. Officials attributed rising yields to expectations of higher Fed rates, the AI build-out and solid growth, while staff economists noted some of the surge may stem from uncertainty related to the Treasury’s buyback program. Secretary Scott Bessent announced in August that the department would ramp up buybacks of already-issued long-dated debt, a move Cnbc reported has had little effect on yields.

A New York Fed survey released Wednesday showed consumer fears about rising prices over the next year at their highest since May 2023.

What to watch

The FOMC next decides on rates October 27 and 28, then again on December 9. Inflation releases and further comments from officials between now and then will determine whether the projected second hike of the year arrives or slips.

Written by

Benjamin

Benjamin Carter covers business, finance, and the stock market for StockPil, focusing on the trends and data that matter to everyday investors.

Sources: CNBC, Cryptobriefing