Minutes from the Federal Reserve’s September 15–16 meeting show that most officials expect another interest rate increase this year as they work to bring inflation toward the central bank’s 2% target. Officials unanimously agreed that inflation remained elevated and had made limited progress in recent months, according to the account released Wednesday.
At that meeting, the Fed raised its benchmark rate by a quarter of a percentage point to about 3.9%, its first increase in three years. The decision came despite President Donald Trump’s repeated requests for lower rates. Trump criticized the committee responsible for the decision but continued to express support for Fed Chair Kevin Warsh, whom he appointed earlier this year.
The prospect of further tightening comes as households face high prices for groceries, gasoline and housing. Affordability is also a prominent issue ahead of the midterm elections. Higher interest rates can make borrowing more expensive, although the report says the Fed’s latest increase has probably been only a limited factor in the recent rise in longer-term borrowing costs, including mortgage rates.
Other factors cited for the rise include growing government debt, substantial borrowing by technology companies to build data centers, higher oil and gas prices, and indications that economic growth and inflation remain strong. Those forces affect longer-term rates differently from the Fed’s short-term policy rate, complicating the outlook for borrowers.
Despite expectations of another increase this year, policymakers have indicated they can wait to assess economic data and the effects of September’s move. Futures pricing suggests investors expect the Fed to leave rates unchanged at its October 28–29 meeting and raise them in December. The minutes reflect officials’ assessment at the September meeting, rather than a commitment to a particular course. Future decisions will depend on how inflation and the economy develop in the months ahead.