Fed minutes show most officials expect another rate hike

Most US Federal Reserve policymakers expect another interest rate increase before the end of the year, minutes released Wednesday showed, as the central bank continues to target inflation above its long-term goal.

At its September meeting, the Federal Open Market Committee voted unanimously to raise interest rates by 25 basis points to a range of 3.75% to 4.00%.

“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.

Several participants said they viewed the previous policy rate as not restrictive enough for economic activity. The minutes said almost all participants assessed that inflation risks were tilted to the upside, while risks to the labor market had diminished and were broadly balanced.

The Fed's preferred inflation gauge, the Personal Consumption Expenditures price index, peaked at 7.2% in June 2022, fell to 2.2% in September 2024 and then rose again. It reached 3.8% in May and eased to 3.4% by August, the latest available month in the supplied data.

The minutes said participants saw insufficient progress in lowering inflation in recent months. They cited geopolitical developments that pushed up prices for crude oil and refined fuels, along with surging AI-related investments, as contributing to inflation pressures.

Participants also warned that the longer energy prices remain elevated, the greater the risk that cost increases in some sectors could lead to broader price pressures.