Fed Minutes Show Unanimous September Hike, Patience for October

Federal Reserve officials unanimously backed the September rate increase, while the minutes said most considered another increase appropriate by year-end and left the timing dependent on incoming data.

All 19 participants supported a 25-basis-point increase, lifting the federal funds target range to 3.75%-4%. It was the Fed’s first rate hike since July 2023.

“Most participants judged that it would likely be appropriate to raise the target range for the federal funds rate once more by year-end,” the minutes said. Officials also emphasized that they would assess each meeting independently as new economic data arrived.

Market pricing for a quarter-point increase at the Oct. 27-28 meeting dropped from about 70% shortly after the September decision to below 20%. Expectations shifted toward a possible December move, although the minutes did not establish a firm timetable.

The decision to raise rates reflected differing concerns. Some officials viewed the move as insurance against inflation remaining above the Fed’s 2% target, while others wanted to limit the risk that higher energy costs and other shocks would spread through the economy. Nearly all participants saw inflation risks tilted to the upside, with artificial intelligence investment also identified as a potential source of demand and cost pressure.