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Most participants see a year‑end increase, with 16 of 18 forecasting one; the report says an October move looks unlikely.
Minutes from the Federal Reserve’s latest meeting say most officials expect another hike this year, but without a timeline. The Fed next decides rates on Oct. 28 and then on Dec. 9. The report says an October move looks unlikely; if so, that would leave December as the remaining scheduled window for another hike this year.
Most see one more increase this year
“With regard to the outlook for monetary policy beyond the current meeting, most participants assessed that another increase in the target range for the federal funds rate would likely be appropriate by year end,” the minutes said. They added a caveat: “Participants emphasized, however, that they approached each meeting with an open mind and decisions at future meetings would depend on incoming information and its implications for the outlook and the balance of risks.”
As a group, the Federal Open Market Committee indicated one more hike this year, then none in 2027, according to the report. Of the 18 officials who submitted forecasts, 16 expected another increase, which is roughly 89% (16 against 18). Chairman Kevin Warsh has not submitted a forecast since taking the position in May.
On Sept. 16, the committee unanimously raised the benchmark rate by a quarter percentage point, the report says. In his news conference, Warsh described the move as removing “a dose of accommodation” from policy.
Data and yields complicate timing
The Fed’s preferred gauge, the personal consumption expenditures price index, showed core inflation at 3% in August and headline at 3.4%, the report says. Both remain above the 2% target, by about 1.0 and 1.4 percentage points respectively, and were “considerably lower than expectations,” in part due to changes in how some inputs are calculated.
Discussion at the meeting showed officials see risks that inflation will prove sticky, while the labor market is “close to maximum employment” and overall growth has picked up, according to the minutes. “Many participants emphasized that a higher path for the target range would be prudent on risk-management grounds, providing insurance against inflation remaining persistently above target due to stronger-than-expected demand or further adverse supply shocks,” the summary said.
The report notes that, coming out of the meeting and Warsh’s tough inflation remarks, markets initially bet on another move in late October. Subsequent inflation data and comments from leading Fed officials indicate an October increase is unlikely, it adds.
Treasury yields have risen to levels not seen since 2002. Officials discussed the rise, attributing it to expectations for higher policy rates, the build-out in artificial intelligence and solid economic growth, the minutes show. Staff economists also pointed to “uncertainty related to the U.S. Treasury’s announcement and implementation of the buyback program.” Treasury Secretary Scott Bessent announced in August that the department would ramp up buybacks of already issued long-dated debt, a step the report says has had little impact on yields.
A New York Fed survey released Wednesday showed consumer fears over rising prices in the next year at their highest since May 2023. The minutes reiterate that each decision will depend on incoming information; the next scheduled policy decision is Oct. 28, followed by Dec. 9.
Source: CNBC.
This article was written with AI assistance and reviewed by an editor.
This content is for informational purposes only and does not constitute financial advice.
🧠 HafidWatch Take
Despite some easing in inflation and strong labor market signals, the Federal Reserve appears committed to maintaining caution, acknowledging that risks of persistent inflation remain. The recent rise in Treasury yields reflects market anticipation of higher rates and robust economic activity, but the effectiveness of Treasury’s buyback program in influencing these yields remains limited. Going forward, the Fed’s decisions will likely continue to balance the tight labor market and ongoing inflation pressures against the evolving economic landscape, underscoring the uncertainty that guides its policy path.
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