All 19 Federal Reserve officials backed the September rate increase, with many participants arguing that higher borrowing costs would help prevent inflationary pressures from intensifying further.

Minutes from the September 15-16 meeting of the Federal Open Market Committee, released on Wednesday, showed that some officials judged a rate increase necessary based on their assessment of the economic outlook, reflecting heightened concern over elevated inflation.

"Most participants considered that one more increase in the target range for the federal funds rate at a future meeting could be appropriate," the minutes said.

Voting members of the FOMC unanimously supported raising the benchmark target range by 25 basis points to 3.75%-4% last month, the central bank's first hike since July 2023.

"Several participants noted that the underlying momentum in the economy appeared to have strengthened," the minutes said.

The record also showed officials discussed financial conditions. Many officials said that despite the recent rise in long-term U.S. Treasury yields, "financial conditions appeared to remain supportive of economic growth, with equity prices having risen substantially this year and corporate bond spreads remaining at narrow levels."

Fed Chair Kevin Warsh told reporters after the September 16 decision that the hike was intended to remove "a dose of accommodation" because inflation remains stubbornly high. His remarks drove markets to ramp up bets on another increase in October.

Since that meeting, however, speeches by several key Fed officials have signaled the central bank may not be in a hurry to raise rates consecutively. Vice Chair Philip Jefferson and New York Fed President John Williams said in separate remarks last week that they believe the central bank has time to assess economic conditions before making its next rate decision. Investors quickly scaled back expectations for an October hike.

Adjusted expectations: Federal funds rate futures prices showed investors on Wednesday saw roughly a 20% probability that the Fed would raise rates by another 25 basis points in October, compared with about 70% in the days following the September decision.

The two-year U.S. Treasury yield, which is most sensitive to Fed policy, has fallen by more than 10 basis points over the past week to near 4.8%.

But last week's remarks by Williams and Jefferson do not mean the Fed will refrain from further policy adjustments. Officials continue to warn that inflation is too high. Consumer price data due on October 14 could reignite expectations for a near-term hike.

If a majority of committee members again vote to hold steady at the October meeting, some officials, including the three who dissented in favor of a hike in July, may again cast dissenting votes in support of raising rates.

The minutes showed that several participants, referring to the benchmark rate before the September increase, said "the current policy rate is not restrictive, or only mildly restrictive."