The Fed Is Leaning Toward Another Rate Hike: What the Regulator's "Minutes" Revealed

At the Fed’s most recent meeting in September, a group of Fed officials agreed that, by the end of the year, to slow the pace of inflation—which has exceeded the central bank’s 2% target for more than five years— it would “likely” be “appropriate” to raise rates one more time, according to the meeting minutes released on October 7.

“As for the outlook for monetary policy following this meeting, most participants believed that one more increase in the target range for the federal funds rate would likely be appropriate before the end of the year,” the document states.

At the same time, Fed officials emphasized that they “approach each meeting without a preconceived position, and decisions at upcoming meetings will depend on incoming data and its impact on the outlook and the balance of risks,” according to the minutes.

Last month, members of the Federal Reserve’s Federal Open Market Committee (FOMC) unanimously supported raising the interest rate by a quarter of a percentage point, to 3.75–4%. This was the first such increase since July 2023. The decision was made amid signs of an acceleration in the overall economy, Bloomberg notes. “Several [FOMC] participants noted that the pace of economic growth appeared to have accelerated,” the minutes also state.

Following the release of the Fed’s “minutes”—as the detailed official minutes of the FOMC meeting are called—expectations regarding the future trajectory of U.S. monetary policy remained unchanged: Traders continued to price in a more than 80 percent probability that interest rates will remain unchanged at the Fed’s next meeting in October, according to data from the CME’s FedWatch tool. In December, however, market participants estimate there is a 68% probability of a rate hike—the same estimate as the day before.

Despite the “hawkish” unity displayed by Fed officials in support of a rate hike in September and the statement regarding another possible hike before the end of the year, overall, the minutes showed no signs that the central bank intended to initiate a series of interest rate hikes, according to MarketWatch. Many FOMC members presented the September move as a safeguard against persistently high inflation, while a smaller group of officials stated that the decision was necessary specifically to combat sustained price increases. According to the minutes, the Fed largely believes that inflation is slowing, and that the September rate hike will accelerate this process.

According to the regulator’s economic forecast, most officials believe that one more rate hike will be the last one needed to cool inflation. After that, the Fed will be able to keep rates unchanged and, starting in 2028, will begin to gradually lower them. The Fed’s inflation forecast for 2026–2028 turned out to be slightly higher than the July forecast, notes MarketWatch. According to the forecast, the Federal Reserve expects inflation to decline over the next two years and reach the Fed’s 2% target in 2029.

This article is being updated

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