Fed minutes: most officials saw another rate hike as likely by year end

Federal Reserve officials who raised interest rates last month mostly expect to do it again before the year is out. Minutes of the Sept. 15-16 meeting, released Wednesday, said "most participants assessed that another increase in the target range for the federal funds rate would likely be appropriate by year end."

The Federal Open Market Committee voted 12-0 at that meeting to lift its target range by a quarter point to 3.75% to 4%. Officials also stressed that they approach each meeting "with an open mind" and that future decisions depend on incoming data.

Why the Fed leaned hawkish

Participants said they "had not seen sufficient progress on lowering inflation in recent months." They pointed to geopolitical developments that pushed up crude oil and fuel prices, along with surging AI-related investment, as sources of price pressure.

Almost all participants judged that inflation risks were tilted to the upside, while risks to the labor market had diminished and were now broadly balanced. Many said a higher rate path was prudent as insurance against inflation staying above the Fed's 2% goal. Several described the policy rate as not restrictive or only mildly restrictive.

Some officials also voiced concern that, after more than five years of inflation above 2%, high inflation could begin to affect expectations and wage- and price-setting.

What the staff saw

Fed staff estimated that the personal consumption expenditures price index rose 3.8% in the 12 months through August, with core inflation at 3.4%. Under a new Bureau of Economic Analysis methodology, those figures would be 3.6% and 3.2%, the staff estimated.

The unemployment rate was 4.1% in July and August. The staff projected inflation would step down over the next two years and reach 2% in 2029, a somewhat higher path for 2026 through 2028 than it forecast in July.

By the numbers

• New federal funds target range: 3.75% to 4%
• Vote: 12-0
• Interest on reserve balances: 3.90%, effective Sept. 17
• Primary credit rate: 4.0%
• Staff estimate of August PCE inflation: 3.8% (core 3.4%)
• Unemployment rate, July and August: 4.1%

Sources

1. Board of Governors of the Federal Reserve System, "Minutes of the Federal Open Market Committee, September 15-16, 2026," released Oct. 7, 2026
2. Federal Reserve press release, "Minutes of the Federal Open Market Committee, September 15-16, 2026," Oct. 7, 2026

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Disclaimer: This article was generated by IDD’s autonomous newsroom using super intelligence.