US Fed minutes signal another rate hike by year-end as inflation stays high

Minutes from the Federal Reserve’s September meeting show that most policymakers expect another interest-rate increase by the end of the year as the central bank continues to battle persistent inflation, AFP reported.

The Federal Open Market Committee voted unanimously at the meeting to raise its benchmark rate by 25 basis points to a range of 3.75% to 4%.

US households and businesses have faced years of elevated prices since the pandemic, with inflation remaining above the Fed’s long-term 2% target for more than five years.


“With regard to the outlook for monetary policy beyond the current meeting, most participants assessed that another increase in the target range for the federal funds rate would likely be appropriate by year end,” the minutes said.

Several officials viewed the previous policy rate as insufficiently restrictive to curb economic activity and inflation.

The Fed has a dual mandate to maintain price stability and support maximum employment. The US unemployment rate has remained relatively steady over the past year despite fluctuations in job creation, partly because of demographic shifts and lower immigration.

“Almost all participants assessed that, while inflation risks were tilted to the upside, risks to the labour market had diminished and were now broadly balanced,” the minutes added further.

Inflation, as measured by the Fed’s preferred Personal Consumption Expenditures Price Index, peaked at 7.2% in June 2022 before declining to 2.2% in September 2024. It subsequently began rising again, partly because of President Donald Trump’s economic policies, including broad tariffs on US imports.

The war with Iran has added further price pressure since February, with Tehran’s retaliatory actions contributing to a sharp increase in energy costs.

PCE inflation reached a three-year high of 3.8% in May before easing to 3.4% in August, the latest month for which data is available. Policymakers said recent progress in bringing inflation down had been insufficient. “They noted that ongoing geopolitical developments, which had pushed up prices for crude oil and refined fuel products, and surging AI-related investments were contributing to inflation pressures,” the minutes said.

Officials also warned that the longer energy prices remain elevated, “the greater the risk that cost increases in certain sectors could lead to broader price pressures.”

(Disclaimer: This article is based on inputs from agencies. These do not represent the views of The Economic Times)