FOMC Minutes Signal ‘Another Hike This Year’ ... but Give No Timing

[Financial News]

U.S. Federal Reserve policymakers expect to raise interest rates further before the end of the year, but offered no hint about the timing.
According to the minutes of the Federal Open Market Committee (FOMC) meeting held on the 15th and 16th of last month, released by the Fed on the 7th (local time), FOMC members expected another rate hike this year would be needed to bring down inflation, which has been above target for more than four years. At the time, the Fed raised its benchmark interest rate by 0.25 percentage point after concluding its two-day FOMC meeting, its first such increase in about two years.
However, the minutes gave no indication of when FOMC members expected the next hike to take place. The Fed has two FOMC meetings left this year, on the 27th and 28th and on December 8 and 9.
Markets are betting on another hike in December.
The minutes said, “Regarding the monetary policy outlook after this meeting, most participants judged that it would be appropriate to raise the federal funds (FF) rate target range further by the end of the year.”
However, any further hike is expected to be carried out cautiously.
The minutes added, “Participants emphasized that they would approach each meeting with an open mind and that decisions at future meetings would be based on the information that becomes available and its implications for the outlook and the balance of risks.”
Markets initially saw a further rate hike this month as likely, but recently revised that outlook amid softer inflation and employment data. According to CME Group’s FedWatch Tool, markets put the probability of rates remaining unchanged this month at 80.6%. Instead, they see the likelihood of a further 0.25-percentage-point hike in December as above 70%.
The discussions among FOMC members last month are no longer relevant. At the time, members assessed that inflation was proving stubborn, the labor market was nearing maximum employment, and overall economic growth was accelerating.
However, the personal consumption expenditures (PCE) price index, the Fed’s preferred inflation gauge, rose 3.4% year over year in August, while the core index rose 3%; both readings came in well below expectations. Employment growth also slowed sharply in September, and forecasts for U.S. economic growth are being revised downward.
[email protected] Song Gyeong-jae Reporter