Fed Minutes Show All 19 Officials Backed September Rate Hike With Most Expecting Another Increase by Year-End

Minutes from the Federal Reserve's September 15-16 meeting, released October 7, showed all 19 participants supported a 25-basis-point rate hike that brought the federal funds rate to 3.75-4.00%, and most judged another increase would likely be appropriate before the end of the year. Almost all participants viewed inflation risks as tilted to the upside, while risks to the job market were seen as broadly balanced, with officials noting the labor market appeared near full employment. Some participants flagged that the AI investment boom could cause aggregate demand to outpace supply over the medium term, adding further pressure on inflation, and several assessed the current rate as not restrictive or only mildly so.

Despite a recent rise in long-term Treasury yields, many participants said financial conditions remained supportive of economic growth. A few noted that Treasury market functioning had been smooth but stressed the importance of planning for potential market stress. The Fed staff's economic outlook prepared for the meeting was stronger than the one produced for the July meeting.

The minutes landed against an already-pressured equity market. As of midday, the S&P 500 was down roughly 0.51-0.61% to around 7,779, the Dow Jones Industrial Average was off as much as 1.04% to near 51,018, and the Nasdaq 100 was down approximately 0.70-0.92%, with indices pulling back from record highs set earlier in the week. Caterpillar tumbled more than 6%, standing out as one of the session's sharpest decliners. Rising Treasury yields drove much of the selling pressure, reviving debate about whether bonds now offer a credible alternative to equities. President Trump, separately, called for interest rates to come down and suggested the Fed board wanted the economy to perform poorly.