Fed Minutes Point to Another Hike, With Timing Still Uncertain
By Jacqueline Policastro | Quincy News Correspondent
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Washington (Quincy News) — Most Federal Reserve officials expected another interest-rate increase before year-end, minutes released Wednesday show, as policymakers worried that energy shocks and the AI boom could make inflation harder to contain.
The Sept. 15-16 meeting produced a unanimous quarter-point increase to a range of 3.75% to 4%. The minutes show officials saw reasons to go further. Several described the policy rate as “not restrictive or only mildly restrictive,” while some officials also warned that persistent inflation could become more entrenched.
Fed staff raised their inflation forecasts for 2026 through 2028 and did not project a return to the central bank’s 2% target until 2029.
For David Mitchell, professor of economics and director of the Bureau of Economic Research at Missouri State University, the message was overdue.
“I think they’re way behind the curve,” Mitchell told Quincy News.
Mitchell said the Fed appears to be recognizing that price pressures extend beyond gasoline and diesel. He argued that years of inflation have compounded the strain on households, leaving them less able to absorb the latest increases.
“It grows on itself. It compounds,” Mitchell said, adding, “I think they should go ahead and hit October and just kind of get it all over with.”
The September jobs report, released Oct. 2 after the Fed’s meeting, showed employers added 29,000 jobs, down from August’s revised gain of 133,000. The unemployment rate was 4.2%.
But his forecast is more cautious than his prescription. Mitchell suspects policymakers will wait beyond October to see whether September’s hiring was a temporary setback or a sign of something more lasting.
That weaker employment report is also central to the outlook of David Kass, a clinical professor of finance at the University of Maryland’s Robert H. Smith School of Business. He predicts a quarter-point increase in December rather than October.
“I think they will be patient,” Kass told Quincy News.
Kass’s case for waiting is not a warning that the economy is falling apart. He sees AI-related investment and productivity gains supporting growth and corporate profits.
“I think overall, the economy’s in good shape,” he said.
Still, Kass warned that higher long-term borrowing costs could discourage investment elsewhere. As large technology companies compete for financing, other businesses may find their own projects too expensive to pursue.
The minutes capture that tension. Many officials saw financial conditions as supportive of growth despite higher Treasury yields, noting gains in stock prices. Several described credit as broadly available. A few pointed to housing as an exception, with elevated mortgage rates weighing on activity.
Most officials saw another increase as likely appropriate by year-end, but they stopped short of committing to a timetable. Future decisions, they emphasized, would depend on incoming information.
The Fed next meets Oct. 27-28.
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