Fed minutes show most officials expect another US rate hike this year, despite October pause signals
Minutes of the Federal Reserve's September 15-16 meeting, released Wednesday, show most officials expect another quarter-point rate increase by year-end to combat persistent inflation, according to the Associated Press. The Fed raised its benchmark rate to about 3.9%, its first increase in three years, with all participants supporting the move. Markets, per Yahoo Finance, have cut the odds of an October hike to roughly 20%.
Bottom line — Traders now price a December hike rather than October, with US consumer price data due 14 October as the next test.
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The AP reports officials unanimously agreed inflation remains elevated, with overall prices up 3.4% on a year earlier, while core prices rose 3%.
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Invezz, citing federal funds futures, puts the chance of an October increase at about 20%, down from around 70% in the days after the September decision.
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FXStreet notes the September minutes predate the weaker September jobs report, which showed employers adding 29,000 jobs against forecasts of 90,000.
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The Wall Street Journal says the minutes did not show an urgent case for an October move, though many officials saw the hike as justified against inflation risks.
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Reuters, reporting on the same minutes, highlights a split in the committee over the logic of the September hike, with some officials focused on energy shocks and others on demand-driven inflation.
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Analysts at Nationwide, quoted by MarketWatch, expect hikes in both October and December, while Wilmington Trust's Luke Tilley argues the Fed is finished hiking and will cut next year.
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The Fed's July minutes, published on the central bank's website, show three members dissented in favour of a hike at that meeting, a detail that foreshadowed the September decision.
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Morningstar reports Fed staff now expect inflation to reach the 2% target only in 2029, later than in the July forecast.