FOMC Minutes Point to a Year-End Hike as October Meeting Nears

The news

The Federal Open Market Committee meets Tuesday and Wednesday, October 27-28, about six weeks after it raised the target range for the federal funds rate by 25 basis points to 3-3/4 to 4 percent in a unanimous 12-0 vote. Officials have been silent since a communications blackout began on October 17, so the record to read is the September FOMC minutes, the Summary of Economic Projections and the October Beige Book.

• Most participants in September judged that another increase in the target range would likely be appropriate by year end, while stressing that each meeting would be approached with an open mind.
• The median dot plot projection for the federal funds rate at the end of 2026 was 4.1 percent, up from 3.8 percent in June.
• The October 27-28 meeting does not come with new projections. The next Summary of Economic Projections arrives at the December 8-9 meeting.

Our analysis

The minutes give the clearest account of how the committee is reasoning. All participants supported the September increase. Many described a higher path as prudent risk management, insurance against inflation staying above target if demand proved stronger than expected or supply shocks continued. A number saw a higher path as necessary on their central outlooks. Several said the policy rate was not restrictive or only mildly restrictive, and a couple had raised their estimate of the neutral rate.

The staff data behind that stance were firm. Total PCE inflation was estimated at 3.8 percent over 12 months in August and core PCE at 3.4 percent, or 3.6 and 3.2 percent under the new methodology the Bureau of Economic Analysis planned to introduce at the end of September. Unemployment was 4.1 percent in July and August. The September projections put PCE inflation at 3.7 percent for 2026 and the unemployment rate at 4.1 percent, with the median funds rate path of 4.1 percent in 2026 and 2027, 3.9 percent in 2028 and 3.6 percent in 2029. A 4.1 percent median for this year is consistent with one more quarter-point increase from the current range, which is the arithmetic behind the minutes’ wording about year end.

New information since then is mixed. The October Beige Book, collected through October 5, found little or no growth outside manufacturing, flat employment in most Districts and firmer prices, with oil appearing in every District report. Market rates show the policy rate in place: the effective federal funds rate was 3.88 percent each day from October 16 to 22, the Fed’s H.15 release shows, and the discount window primary credit rate was 4.00 percent. Treasury yields eased on October 22, with the 2-year at 4.65 percent from 4.81 percent the day before and the 10-year at 4.96 percent from 5.13 percent.

For a hawkish Fed storyline, the question is timing. The minutes say a year-end move is likely but also that decisions would depend on incoming information. The committee has two meetings left in 2026, October and December, and only the December meeting has a new set of projections attached.

Room for disagreement

One reading is that the committee does not need to move in October. It raised rates five weeks ago, the Beige Book shows slight growth, and a December move would come with a fresh dot plot. The minutes’ phrase that participants approach each meeting with an open mind supports patience.

The other reading stresses the inflation language. The minutes record that many participants viewed the longer energy prices stay elevated as raising the risk of broader price pressures, and that some worried five years of above-target inflation could affect expectations and wage and price setting. The September statement said the committee “will deliver price stability.” An earlier move would be consistent with that stance.

What to watch

Read the October 28 FOMC statement against September’s: the description of activity as expanding at a “solid pace,” the word “elevated” for inflation, and the final sentence on price stability. Any dissents will matter, since September’s vote was unanimous. Also watch the target range and the interest rate on reserve balances, which was 3.9 percent after the September increase. Officials can begin explaining their views again after the blackout ends at the close of October 29.