When Federal Reserve officials met to raise interest rates last month, most expected a further increase later this year, but minutes of the meeting, published Wednesday, didn't show that policymakers made an urgent case that such a follow-on move should come at the next meeting in October.
Officials were unanimous in backing the September rate increase to respond to persistent inflation. Many officials believed the rate increase was justified to address the risk that inflation will run above expectations, while some thought that the current outlook for price increases was itself enough reason to raise rates, according to the minutes.
Most officials filed projections at the September meeting showing one more rate increase across the Fed's two remaining policy meetings this year, in October and December. A small handful penciled in increases at both meetings.
But the minutes of the meeting, released with the customary three-week delay, didn't reflect clear plans to bring rates higher again later this month -- an outlook that accords with recent comments from key policymakers who have suggested a further rate increase can wait until December.
"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. "Participants emphasized, however, that they approached each meeting with an open mind and decisions at future meetings would depend on incoming information."
September's rate increase followed a frustrating summer for the Fed, when inflation defied many officials' hopes that it would cool on its own.
To shoppers, a bumpy rise in fuel costs sparked by the Iran war has been one of the most painful examples of ongoing price increases. But the Fed also ran short on patience with broader inflation trends, bolstered by the AI investment surge and the Trump administration's tariffs.
In a press conference following the September rate increase, the Fed's first in three years, Chairman Kevin Warsh said that prices on too many types of products are rising faster than the central bank wants to see. "This summer's inflation readings do not tell me that underlying trends have meaningfully improved," he said.
Solid economic readings late last month, including an especially strong S&P Global survey of purchasing managers on Sept. 23, sparked initial bets in financial markets that the Fed could raise rates again at its next policy decision on Oct. 28.
Those bets unwound last week after two top Fed leaders, New York Fed President John Williams and Fed Vice Chair Philip Jefferson, both signaled that while they expect the Fed to raise rates further, there's little urgency to act again in October. Many Fed watchers inferred that their comments reflected a broader consensus among officials that the Fed could wait until December to raise interest rates again.
Friday's cooler-than-expected September jobs report did nothing to jolt those expectations of an October pause. In particular, a 3% annual increase in average hourly earnings was the lowest in more than five years -- evidence that though the labor market remains stable, it isn't overheating and contributing to inflation.
Warsh's hesitance at his first two Fed press conferences, in June and July, to explain exactly how he planned to address elevated inflation concerned some investors, boosting pressure on the Fed to back its anti-inflation commitment with a September rate increase.
Having followed through with that rate hike, however, the Fed has likely earned from markets the breathing room to delay its next move until December, said Patrick Harker, a former president of the Philadelphia Fed now at the University of Pennsylvania.
He added that the Fed is getting help from a bond selloff that has raised longer-term Treasury yields, lifting mortgage rates and other borrowing costs and thereby applying an economic brake.
"Is it urgent right now that the Fed get rates up? Not really, because the long end of the yield curve has already gone up, and that's the end that matters to the economy," Harker said.