Fed Minutes: Most Officials Saw Another Rate Hike Likely by Year End

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Key Points

  • “Most participants” at the Sept. 15-16 FOMC meeting judged that another rate increase “would likely be appropriate by year end,” minutes released Wednesday at 2 p.m. ET show.
  • All participants backed the quarter-point hike to a 3-3/4 to 4 percent range, the Fed’s first increase since 2023, approved 12-0 under Chair Kevin Warsh.
  • “Almost all participants” saw inflation risks tilted to the upside, and “several” said policy was “not restrictive or only mildly restrictive.”
  • The minutes set no timing for the next move, and officials stressed they approach “each meeting with an open mind.”
  • The next decision comes Oct. 27-28, after September consumer price data due Oct. 14 at 8:30 a.m. ET.

Most Federal Reserve officials left last month’s meeting expecting to raise interest rates again before the end of 2026, according to Fed minutes from the Sept. 15-16 policy meeting released Wednesday. The record shows a committee united behind its first rate hike in three years and worried that inflation is not falling fast enough, but it sets no date for the next step.

What happened

The Fed published the minutes of the September meeting at 2 p.m. ET on Wednesday, three weeks after the decision. At that meeting the Federal Open Market Committee raised the target range for the federal funds rate by a quarter percentage point to 3-3/4 to 4 percent. The vote was 12-0, and the minutes say “all participants supported” the move.

The key line on the outlook: “most participants assessed that another increase in the target range for the federal funds rate would likely be appropriate by year end.” That matches the projections released after the meeting, in which 16 of the 18 officials who submitted forecasts penciled in at least one more hike this year, CNBC and Axios reported. Chair Kevin Warsh did not submit a projection, both outlets noted.

Officials attached a caveat. “Participants emphasized, however, that they approached each meeting with an open mind and decisions at future meetings would depend on incoming information,” the minutes say.

Latest development

The minutes show why the committee moved. Participants said they “had not seen sufficient progress on lowering inflation in recent months,” pointing to higher crude oil and fuel prices tied to geopolitical developments and to surging investment in artificial intelligence. Fed staff estimated that the 12-month rate of personal consumption expenditures (PCE) inflation edged up to 3.8 percent in August, with core PCE at 3.4 percent, under the method then in use, or 3.6 percent and 3.2 percent under a new Commerce Department methodology announced for the end of September.

The arguments for hiking differed. “Many participants” said a higher path for rates “would be prudent on risk-management grounds,” as insurance against inflation staying above the 2 percent target. “A number of participants” saw a higher path as necessary based on their main forecast alone. “Several participants” said they viewed the current policy rate as “not restrictive or only mildly restrictive.”

Risk views shifted too. “Almost all participants” assessed that inflation risks were tilted to the upside while risks to the labor market had diminished and were now broadly balanced. “Some participants” warned that after more than five years of inflation above 2 percent, high inflation could begin to affect inflation expectations and wage- and price-setting decisions.

Why it matters

The minutes confirm that the Fed’s bias is still toward tighter policy, which matters for anyone carrying a credit card balance, a car loan or an adjustable-rate mortgage. Many of those rates follow the benchmark rate the Fed sets, so another hike would push consumer borrowing costs higher.

Energy, AI and the job market

“Many participants” said that the longer energy prices stay high, the greater the risk that cost increases in certain sectors spread into broader price pressures. “Several participants” said the scale and pace of the AI buildout had continued to surprise to the upside, and “some” said it could push demand ahead of supply and add to inflation over the medium term.

On jobs, participants generally viewed the labor market as close to maximum employment, and “a majority of participants” said it had strengthened a bit recently. At the time of the meeting, staff noted the unemployment rate had moved down to 4.1 percent in July and August. “Several participants” also said low- and moderate-income households faced strains from higher energy prices.

Treasury yields and housing

Officials discussed the climb in longer-term Treasury yields. The New York Fed’s markets desk told the meeting that nominal yields rose about 35 basis points across 2- to 10-year maturities between the July and September meetings. The desk tied part of that rise to the higher expected path of policy and strong data, and noted market commentary citing geopolitics, the Treasury’s buyback program and heavy AI-related borrowing. “Many participants” said financial conditions still appeared supportive of growth, while “a few” said housing was the exception, with mortgage rates at elevated levels.

What happens next

Timing is the open question. The minutes did not show an urgent case for a follow-up hike at the next meeting in October, The Wall Street Journal reported. Inflation data and comments from leading officials since the meeting suggest another increase in October is unlikely, CNBC reported, noting that August PCE readings released after the meeting came in lower than expected, helped in part by changes in how some inputs are calculated.

  • Wed., Oct. 14, 8:30 a.m. ET: September consumer price index from the Bureau of Labor Statistics.
  • Oct. 27-28: Next FOMC meeting, with a statement at the close.
  • Dec. 8-9: Final scheduled meeting of 2026, with new economic projections.

For the market backdrop heading into this release, see our preview of the week’s oil and bond yield tests.

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