Highlights
The minutes of the September FOMC meeting confirmed concern about inflation and the need to prevent expectations from becoming"unanchored," with indication another rate hike might come by year end.
"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.
The FOMC has two more meetings in 2026: October 27-28 and December 8-9. That being said, participants stressed they would approach"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".
On financial conditions,"many" participants estimated conditions were"supportive of economic growth, with equity prices having risen substantially this year and spreads on corporate bonds having remained narrow." Several even noted that credit seemed"broadly available", although"a few" participants noted financial conditions were not supportive of housing activity, with mortgage rates still high.
"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 report added. Several participants viewed the policy rate as"not restrictive or only mildly restrictive."
"Some participants remarked that a higher policy rate would diminish the risk of persistently elevated inflation unanchoring inflation expectations and becoming further entrenched," the minutes added.
The FOMC raised the fed funds target rate range by 25 basis points to 3.75 to 4.00 percent in an unanimous decision (12-0) on September 16.
The policy statement said the move would “support a timelier return” to the 2 percent target, while reiterating"The Committee will deliver price stability" and"inflation remains elevated".
Inflation risks were seen as"skewed to the upside" while risks to the labor markets"had diminished" and were seen as"balanced", the minutes said.
"Based on the outlook and the changing balance of risks, all participants viewed a higher target range for the federal funds rate as appropriate," the report added.
In September, the central bank also updated the quarterly summary of economic projections (SEP) amid the ongoing Middle East conflict and sticky inflationary pressure, with the inflation rate remaining at 3.4 percent in August. The 2026 forecasts for inflation as measured by the PCE deflator were revised up to 3.7 percent from 3.6 percent, and core PCE inflation projection was revised up to 3.4 percent from 3.3 percent. GDP growth was revised up for 2026 to 2.3 percent from 2.2 percent, and for 2027 to 2.4 percent from 2.3 percent.
Today's minutes said"A couple of participants remarked on having increased their estimate of the neutral federal funds rate and thus their view of the appropriate setting of the target range for the federal funds rate."
The report reiterated the view that the economy was expanding at a"solid" pace, which was reflected in the policy announcement, along with"robust" business investment and resilient consume spending.
Definition
Detailing the issues of debate and consensus among policymakers, the Federal Open Market Committee issues minutes of its latest meeting three weeks after the meeting.
Description
The FOMC has changed dramatically in the transparency of its operations. It now discloses policy changes at the end of each meeting. Historically, the Fed used to keep investors guessing about policy changes and Fed officials did not appear on the speaking circuit as frequently as they do now.
The Fed's minutes are a market mover as investors and analysts parse each word looking for clues to policy. The minutes include the complete economic analysis compiled by Fed officials and opinions at odds with the consensus.
Investors who want a more detailed description of Fed opinions will generally read the minutes closely. Fed officials also make numerous speeches, which give their views to the public at large.