Fed Minutes Show Most Officials Expect Another Rate Hike This Year

Most Federal Reserve officials expect another interest rate increase will probably be needed this year to fight inflation, according to minutes of the central bank's latest meeting released Wednesday, as reported by ABC News.

The minutes suggest borrowing costs could stay under upward pressure at a time when Americans are already dealing with high prices for groceries, gas and housing.

What the minutes say about inflation

According to the minutes, officials were unanimous that inflation remains elevated and has not made much progress toward the Fed's 2% target in recent months. At its Sept. 15-16 meeting, the Fed raised its key rate by a quarter-point to about 3.9%, ABC News reported. It was the first increase in three years.

Political backdrop to the decision

The increase went against repeated calls from President Donald Trump for lower rates. ABC News reported that Trump criticized the Fed's rate-setting committee after the move, though he still voiced support for Chairman Kevin Warsh, whom he appointed earlier this year.

The timing is notable politically. Affordability has become a leading issue in the midterm elections, which are seven weeks away.

Why it matters for borrowers and households

Another hike would add to the cost pressures many households already face. Longer-term rates, including those for mortgages and other borrowing, have also jumped in recent months, according to ABC News.

The report listed several reasons for that rise: growing government debt, heavy borrowing by tech companies to pay for data center construction, higher oil and gas prices, and signs that growth and inflation remain elevated. The Fed's September hike has likely played only a limited role in the increase in longer-term rates, the report said.

What happens next

Since the meeting, key policymakers have said the Fed can take time to watch the economy and the effect of the September increase before acting again, according to ABC News. Based on futures pricing, Wall Street investors now expect the Fed to leave its rate unchanged at its next meeting on Oct. 28-29 and to raise it when officials meet in December.

The minutes describe what most officials expect rather than a firm decision, and the path of rates will depend on how the economy and inflation develop.

Source: ABC News