Fed’s Unanimous September Rate Hike Faces a Changed Outlook
The Federal Reserve’s September rate rise had unanimous backing.
The Federal Reserve’s September rate rise had unanimous backing. Since then, softer inflation and slower hiring have complicated the case for another increase.
Minutes from the Sept. 16 meeting, released Wednesday, show all participants favored a higher target range for the federal funds rate, citing persistent inflation and an economy that was still expanding at a solid pace. The Fed raised its benchmark rate by a quarter point to a range of 3.75% to 4%, its first increase in three years.
Officials saw room for another increase
At the time of the decision, most Federal Open Market Committee members thought at least one more quarter-point increase could be appropriate before year-end. Markets had also been pricing in a hike and anticipating further tightening.
The minutes described inflation as elevated and the labor market as close to full employment, with some signs of strengthening. Nearly all officials saw inflation risks leaning upward, while risks to employment had become more balanced.
“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 minutes said.
New data complicates the next move
Economic releases in recent weeks have altered the outlook that shaped the September vote. August core personal consumption expenditures, the Fed’s preferred measure of underlying inflation, increased 3% from a year earlier, down from 3.3% in July and below economists’ 3.3% expectation, according to the supplied reporting.
Hiring has also slowed, while inflation has cooled more than officials had expected, the reporting said. Those shifts have led some policymakers who backed September’s increase to suggest that another hike could wait.
The change matters beyond the committee’s internal debate. Higher borrowing costs can affect households and businesses, while the Fed’s response depends on whether price pressures or labor-market weakness pose the greater risk. The meeting minutes show how officials assessed that balance then; incoming data has since made the next decision less straightforward.
The Fed said future rate decisions would depend on economic data. In September, most participants still saw a case for at least one additional quarter-point hike before year-end.
