Fed Minutes Reveal Officials Expect Another Rate Hike This Year

(RTTNews) - Most Federal Reserve officials expect to once again raise interest rates before the end of the year, according to the minutes of the central bank's September monetary policy meeting released on Wednesday.

The Fed said, "Most participants assessed that another increase in the target range for the federal funds rate would likely be appropriate by year end."

However, the minutes did not provide further insight about the timing of the rate hike and said officials emphasized "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."

The Fed's next monetary policy meeting is scheduled for October 27-28, although there has recently been a major shift in expectations for the meeting.

According to CME Group's FedWatch Tool, the chances the Fed will raise rates by another quarter point later this month have tumbled to just 19.4 percent from more than 70 percent a little over a week ago.

The steep drop in expectations for an October rate hike come following the recent release of tamer-than-expected inflation data and weaker-than-expected jobs data.

The Fed is still expected to raise rates before the end of the year, with the FedWatch Tool currently indicating a 69.1 percent chance of a quarter point rate hike at the December 8-9 meeting.

Following the September meeting, the Fed announced that it decided to raise interest rates for the first time since July of 2023.

The Fed said it decided to raise the target range for the federal funds rate by 25 basis points to 3.75 to 4 percent in support of its dual mandate.

The vote to increase rates was unanimous following recent signs of division among Fed officials over the outlook for monetary policy.

The minutes revealed participants viewed a rate hike as appropriate based on the outlook and the changing balance of risks and judged that higher rates would support a timelier return of inflation to the Fed's 2 percent goal.

"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 Fed said.

Along with the announcement of the Fed's latest monetary policy decision, officials also provided their latest projections for the economy and interest rates.

The projections showed that a majority of Fed officials expect rates to be above 4 percent by the end of 2026, suggesting at least one more rate hike this year.