Federal Reserve officials expect they will raise interest rates again before the end of the year to curb inflation that has been above target for more than five years, according to meeting minutes released Wednesday.
But the meeting summary provides no indication of when exactly policymakers were considering raising benchmark rates — only that consistently higher prices and a stable labor market would likely lead to a second hike this year. The Fed will then decide rates on October 28, and again on December 9.
“Regarding the outlook for monetary policy beyond the current meeting, most participants believed that a further increase in the target range for the federal funds rate would likely be appropriate by the end of the year,” the document said.
This position was accompanied by a note of caution.
“Participants stressed, however, that they approached each meeting with an open mind and that decisions at future meetings would depend on the information received and its implications for the outlook and balance of risks,” the minutes said.
After the meeting, in which Chairman Kevin Warsh delivered strong words on inflation at his subsequent news conference, markets began betting that the Fed would follow the Sept. 16 hike with another move at the late October meeting.
However, recent inflation data and comments from top Fed officials indicate that a further hike is unlikely, at least for October.
The Fed’s preferred gauge – the Personal Consumption Expenditures Price Index – showed core inflation at 3% for August and headline inflation at 3.4%. Although both figures were still well above the central bank’s 2% target, they were considerably lower than expected, benefiting in part from changes in how some metrics are calculated.
Discussions at the September meeting showed officials saw risks that inflation could prove persistent, while the labor market is “close to maximum employment” and economic growth overall has accelerated.
The vote to increase the benchmark funds rate by a quarter of a percentage point was unanimous, despite earlier indications that several key officials were reluctant to increase it.
“Many participants emphasized that a higher trajectory for the target range would be prudent for risk management reasons, providing insurance against inflation remaining persistently above the target due to stronger-than-expected demand or further negative supply shocks,” the summary said.
As a group, the Federal Open Market Committee indicated one more increase this year, then none in 2027. Of the 18 FOMC officials who submitted their forecasts, 16 said they expected another increase.
Warsh has not submitted a forecast since taking the position in May. At his news conference, he described the hike as removing a “dose of accommodation” from monetary policy, a remark that Wall Street analysts looked at and interpreted to mean that further increases could be on the way.
But since then, several other officials have stressed that the Fed doesn’t need to rush, while inflation data has been at least a little more encouraging, even as near-term expectations have risen significantly.
Market-based inflation indicators are still elevated, and a new survey released Wednesday by the New York Fed showed that consumers’ fears about rising prices next year are at their highest level since May 2023.
Treasury yields also soared, reaching levels not seen since 2002.
Officials at the meeting discussed the rise in yields, attributing it to expectations of higher rates from the Fed as well as the development of artificial intelligence and strong economic growth. Staff economists also noted that some of this increase could come from “uncertainty related to the U.S. Treasury’s announcement and implementation of the repurchase program.”
Treasury Secretary Scott Bessent announced in August that his department would accelerate its purchases of long-term debt securities already issued. However, this decision had little impact on yields, which are around their highest levels since 2002.
Gn bussni
