Federal Reserve officials overwhelmingly believed that they needed to follow up September’s interest-rate rise with at least one more increase in order to quell inflation, according to minutes from the meeting.
Last month, the Fed voted to raise rates by a quarter of a percentage point to a range of 3.75 percent to 4 percent. It marked the first increase since July 2023 and was unanimously supported by all 12 members of the policy-setting committee.
Projections released alongside the Fed’s rate decision showed that 16 of the 18 policymakers who submitted rate estimates expected at least one more quarter-point move by the end of the year. That would push rates to a range of 4 percent to 4.25 percent. Most wanted rates to stay at or above that level throughout 2027. Officials also raised their estimates for rates for 2028 and beyond compared to three months ago.
According to the minutes, many officials assessed that higher rates 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.” Others suggested that raising rates was necessary based solely on the current outlook for price pressures. Some also suggested that raising rates would guard against the public losing confidence that inflation, which has overshot the Fed’s 2 percent target for nearly six years, would eventually ease.
Moreover, several participants said they did not view the Fed’s previous policy settings as either “restrictive or only mildly restrictive,” suggesting that higher rates were necessary to slow down demand sufficiently and get inflation under control.
At a news conference after the rate decision, Kevin M. Warsh, the Fed chairman, described the increase as the central bank’s attempt to remove a “dose of accommodation so that financial and credit conditions would be more consistent with our ultimate objectives.” Mr. Warsh stopped short of affirming whether September’s move was the first in a series of adjustments, reflecting his opposition to providing guidance about the Fed’s next steps.
But Mr. Warsh’s emphasis on the need to swiftly return inflation to the 2 percent target fueled expectations that the Fed might consider raising rates at its next two-day meeting on Oct. 27-28. That gathering is set to take place at a highly sensitive political moment, just days before the midterm elections.
Heavy-handed signaling from two senior policymakers in recent days — coupled with a softer-than-expected jobs report — reset those expectations, however, carving out more flexibility for the central bank to instead hold off on another increase until its final gathering of the year in December.
Last week, John C. Williams, who has president of the Federal Reserve Bank of New York is the vice-chair of the policy-setting committee, said there was “no need for urgency” in the wake of September’s increase. Two days later, Philip N. Jefferson, the Fed vice chair, said that assessing the timing of additional moves “may take more time.”
Both Mr. Williams and Mr. Jefferson are members of the “troika,” the central bank’s internal policy-steering group led by Mr. Warsh.
According to the minutes, most officials are more worried that inflation will intensify rather than ease given a multitude of risks stemming from the ongoing war with Iran, which has led to a sustained rise in oil prices. Growth has also remained strong, in part because of booming investments by companies seeking to expand their artificial intelligence capabilities. That spending has continued apace despite a sharp rise in U.S. borrowing costs, suggesting that the Fed might have to raise rates more than it otherwise would to restrain economic activity.
According to the minutes, officials concluded that despite the recent rise in longer-term U.S. government bond yields, “financial conditions appeared to be supportive of economic growth, with equity prices having risen substantially this year and spreads on corporate bonds having remained narrow.”
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