Minutes from the Federal Reserve's September policy meeting, released Wednesday afternoon, show that most officials expected to raise interest rates again before year-end even as they conceded inflation has made little recent progress toward the central bank's target.
The Federal Open Market Committee voted 12-0 on Sept. 16 to lift the federal funds rate a quarter point to a range of 3.75% to 4%, according to the minutes published by the Fed. The move, detailed in the committee's September policy statement, also lifted the rate paid on reserve balances to 3.90% and the primary credit rate to 4%.
Fed staff estimated that headline personal-consumption-expenditures inflation ran at 3.8% in the 12 months through August, with the core measure, which excludes food and energy, at 3.4% — both well above the Fed's 2% objective. Participants generally judged that inflation risks were skewed to the upside and said they had not seen enough recent progress to call the fight won, even as they noted that longer-run inflation expectations still looked consistent with 2%.
A Labor Market the Fed Isn't Worried About
The minutes described a labor market that gave policymakers room to keep pressing on rates: unemployment held at 4.1% in both July and August, a level participants characterized as close to maximum employment, with risks to jobs seen as broadly balanced. Officials also said activity was expanding at a solid pace, pointing to resilient consumer spending and a surge in business investment tied to artificial intelligence.
Several participants went further, arguing that the current policy rate is not restrictive, or only mildly so, even amid heavy AI-driven capital spending — an assessment that helps explain why most of the committee was willing to raise rates rather than hold, despite Treasury yields that have already climbed to multi-year highs this autumn.
The decision wasn't a sure thing heading into the meeting, with futures markets pricing the outcome as close to a coin flip in the days beforehand. Stocks slipped and the dollar firmed as officials laid out their reasoning at the post-meeting press conference, and long-dated Treasury yields have continued climbing since.
The minutes give investors their clearest look yet at the committee's internal debate ahead of its next meeting, scheduled for Oct. 27-28, when officials will decide whether to follow through on the additional hike most of them penciled in before the year is out.
