FOMC Minutes — Most See Another Hike by Year End; Several Say Policy Isn't Restrictive

Fundamentals · 2026-10-07

Minutes of the 15-16 September meeting, where the FOMC raised rates 25bp to 3.75%-4.00% on a 12-0 vote: "most participants" saw another increase as likely appropriate by year end; "a number" saw a higher path as needed on their central outlook, not just as insurance; "several" called policy not restrictive or only mildly restrictive; "a couple" raised their estimate of the neutral rate; inflation risks "skewed to the upside", and for some more so than in recent months; "many" said financial conditions still supported growth despite higher long-term yields; staff raised its inflation forecast for 2026-28 and sees 2% in 2029; the Desk paused reserve management purchases; 10-year yield little changed after the release.

What It Changes

• Almost nothing, which is the point. The dot plot already showed 16 of 18 officials expecting at least one more hike this year. "Most participants" is the minutes saying the same thing in words. Yields, the dollar and equities barely moved at 14:00.
• The detail is more hawkish than the headline. "A number" of officials said they needed a higher rate path on their central forecast, not just as insurance. "Several" did not see 3.75%-4.00% as restrictive, and "a couple" had raised their estimate of the neutral rate. Those are the arguments for going further, not for stopping at one more hike.
• Officials don't treat higher bond yields as doing their job for them. "Many" said financial conditions still supported growth despite the rise in long-term yields. That matters with the 10-year now near its highest since 2002: the minutes give no sign the Fed sees it as a substitute for hiking.
• The data since the meeting points the other way. Payrolls rose just 29,000 in September and unemployment rose to 4.2%, after the minutes said a majority saw the labour market strengthening. Core PCE was revised down to 3.0%. The minutes are three weeks old, and the October decision will rest on what has happened since.

Impact

• USD — Neutral — DXY was 102.236 at 14:00, 102.215 at 14:05 and 102.247 at 14:10 (ICE, via Yahoo Finance). The minutes confirmed the path the dollar has been trading.
• The dollar's 0.4% gain today came from oil and European yields this morning, not from the minutes.
• 6E — Neutral — EUR/USD was 1.1203 before the release and 1.1202 at 14:30. The minutes note the ECB has already hiked, so the policy gap isn't widening in the dollar's favour on this news.
• US Indices (ES / NQ / YM / RTY) — Neutral — ES went from 7,852.00 at 14:00 to 7,857.25 at 14:05 and 7,854.75 at 14:10; NQ from 31,353 to 31,387.5 and 31,381 (Yahoo Finance). A hawkish document that was already priced.
• The minutes note equity gains this year came entirely from earnings, with price-to-earnings multiples lower. That is the staff's description of the market, not a forecast.
• Gold (GC) — Neutral — December gold rose from $4,136.60 at 14:00 to $4,143.80 at 14:05 and was back at $4,136.80 by 14:30 (Yahoo Finance).
• Treasuries (ZN) — Neutral — the 10-year was 5.292% at 14:00, 5.277% at 14:05 and 5.284% at 14:10 (CBOE, via Yahoo Finance). December ZN went from 104-13.5 to 104-16.5, then 104-15. The afternoon's bigger move in yields came at the 13:00 auction, not the minutes.

Inside The Number

The FOMC raised the target range 25bp to 3.75%-4.00% on 16 September, its first increase after five holds, on a 12-0 vote. The minutes show the decision was broader than the vote: "all participants" supported the hike, and "almost all" judged that inflation risks were tilted to the upside while labour market risks had become "broadly balanced". The statement ended with "The Committee will deliver price stability."

The forward line is that most expect another hike by year end. The minutes say "most participants assessed that another increase in the target range for the federal funds rate would likely be appropriate by year end." The dot plot from the same meeting had 12 participants at one more hike this year, 4 at two more and 2 at none, a 2026 median of 4.1%. The minutes add the usual caveat that each meeting will be decided on incoming data. Two meetings remain this year: 27-28 October and December.

The case for the hike was not only insurance. "Many" participants said a higher path was prudent on risk-management grounds, against inflation staying above target. But "a number" said it was necessary on their central outlook. "Several" said the current rate was "not restrictive or only mildly restrictive", and "a couple" had raised their estimate of the neutral rate. "Some" worried that after more than five years of inflation above 2%, high inflation could start to affect expectations and wage- and price-setting.

Energy and AI are the two inflation stories. Participants said they had "not seen sufficient progress" on inflation, and pointed to oil and refined fuel prices and AI investment. "Many" said the longer energy prices stay high, the greater the risk of "broader price pressures". "Some" said the AI buildout could push demand above supply. "Several" saw inflation in core goods still elevated, as AI effects increased while tariff effects faded. The staff estimated August PCE inflation at 3.8% and core at 3.4%, or 3.6% and 3.2% under BEA's new methodology. When BEA published that revision on 30 September, core came in at 3.0%, below the staff's estimate.

The labour market was seen as strong, and the data has softened since. A "majority" said it had "strengthened a bit", and participants saw risks to it as balanced. "Several" noted low dynamism: low hiring and layoffs, a low job-finding rate and high long-term unemployment. Since the meeting, September payrolls rose only 29,000 against 90,000 expected, and unemployment rose to 4.2% from 4.1%.

Yields were rising, and the Desk explained why. The manager said 2- to 10-year yields rose about 35bp between the July and September meetings. Market commentary pointed to geopolitics, uncertainty around Treasury's buyback program, and competition for capital from heavy AI infrastructure debt issuance as reasons for higher term premiums. Staff found that real rates drove most of the rise in longer-dated yields, and inflation compensation most of the rise in shorter-dated ones.

The balance sheet is on hold. The Desk had paused reserve management purchases, because reserves were judged still ample, and said purchases are decided month by month. "A few" participants suggested strengthening the Fed's tools for dealing with Treasury market dysfunction, while limiting its footprint in that market.

The Internals

Topic · What the minutes said · Who

The September hike · Supported raising the range 25bp to 3.75%-4.00% · All participants

Further hikes · Another increase likely appropriate by year end · Most participants

Reason for the hike · Prudent on risk-management grounds · Many participants

Reason for the hike · Necessary on their central outlook · A number of participants

Stance of policy · Current rate not restrictive or only mildly restrictive · Several participants

Neutral rate · Raised their estimate of neutral · A couple of participants

Inflation risk · Skewed to the upside · Participants generally

Inflation risk · More skewed to the upside in recent months · Some participants

Energy · Longer high energy prices raise risk of broader price pressures · Many participants

AI · AI buildout could push demand above supply · Some participants

Tariffs · Further tariff increases an upside inflation risk · Several participants

Expectations · Five years above 2% could affect expectations and price-setting · Some participants

Labour market · Strengthened a bit recently · A majority of participants

Labour market · Unusually low dynamism · Several participants

Financial conditions · Supportive of growth despite higher long-term yields · Many participants

Housing · Financial conditions not supportive; mortgage rates elevated · A few participants

Treasury market · Strengthen tools for market dysfunction · A few participants

The Fed's usual scale, from most to fewest: all, almost all, most, many, several, some, a few, a couple. "A majority" and "a number" sit outside that scale.

The September projections (Summary of Economic Projections, medians):

Variable · 2026 · 2027 · 2028 · 2029 · Longer run

Federal funds rate · 4.1% · 4.1% · 3.9% · 3.6% · 3.2%

Fed funds rate, June projection · 3.8% · 3.6% · 3.4% · n/a · 3.1%

PCE inflation · 3.7% · 2.3% · 2.1% · 2.0% · 2.0%

Core PCE inflation · 3.4% · 2.5% · 2.2% · 2.0% · n/a

Unemployment rate · 4.1% · 4.1% · 4.1% · 4.1% · 4.2%

Real GDP growth · 2.3% · 2.4% · 2.2% · 2.1% · 2.0%

Where the 18 participants put the end-2026 rate (midpoint of the target range):

Midpoint · Implies · Participants

4.375% · Two more hikes · 4

4.125% · One more hike · 12

3.875% · No further change · 2

Staff figures quoted in the minutes:

Measure · Staff estimate · Note

PCE inflation, August, 12-month · 3.8% · 3.6% under BEA's new methodology

Core PCE inflation, August, 12-month · 3.4% · 3.2% under BEA's new methodology

Unemployment rate, July and August · 4.1% · 0.3pp below the second half of 2025

Employment cost index, private, 12 months to June · 3.3% · Below a year earlier

Average hourly earnings, 12 months to August · 3.1% · Below a year earlier

2- to 10-year Treasury yields, intermeeting change · About +35bp · Desk manager

Tri-party repo rate vs IORB · -3bp · Average over the period

Effective fed funds rate vs IORB · -2bp · Average over the period

Against This Morning's Open

• The Open said the minutes would show "how many officials favoured further hikes", with a hawkish read supporting December hike pricing near 75%. The answer was "most", which is hawkish but matches the dot plot, so it supported that pricing without moving it.
• The Open also noted the minutes were three weeks old and didn't reflect the oil and yield moves since. The text confirms the timing problem: the labour market view and the inflation estimates both predate weaker payrolls and the PCE revision.

What This Sets Up

• Next FOMC decision: Tuesday-Wednesday, 27-28 October 2026, statement at 14:00 ET on Wednesday 28 October. There is no Summary of Economic Projections at that meeting.
• Minutes of the October meeting: Wednesday, 18 November 2026, three weeks after the decision under the Fed's usual schedule.
• What would confirm the read: a hike on 28 October, or a statement that keeps "will deliver price stability" with no softening. Either would show the "most participants" view held through weaker payrolls.
• What would break it: a hold that drops the hawkish framing, or dissents in favour of holding. That would mean the post-meeting data changed the committee's view.

What Is This?

• What it is: The minutes are the official record of an FOMC meeting, published three weeks after each decision at 14:00 ET. They summarize the staff's economic and financial review, the participants' discussion and the policy decision, without naming individuals. "Participants" means all Board members and Reserve Bank presidents; "members" means the 12 voters.
• Why it matters: The statement and press conference give the decision. The minutes show how widely views are held and why. Under Chair Warsh, who dropped routine forward guidance at Jackson Hole, the minutes are one of the few places to see where the committee as a whole is leaning between meetings.
• How to read it: Read the quantifiers. The Fed uses a consistent scale: "all", "almost all", "most", "many", "several", "some", "a few" and "a couple", in descending order. Compare the minutes with the dot plot from the same meeting and with the data released since. Minutes rarely move markets when the projections already showed the same split; they move markets when they reveal a split the dots did not.

Want the full explainer? Economic News Events, Explained breaks down this release and every other one we cover, in plain English.

_For informational purposes only. Not investment advice._