Fed minutes reveal another hike likely before year end amid elevated inflation

Minutes from the Federal Open Market Committee’s September meeting revealed Wednesday that advisors and their clients are likely to face another rate hike before the end of 2026.

At its September meeting, the Federal Reserve raised interest rates for the first time since July 2023 in a decision unanimously approved with a 12-0 vote. The move also saw the central bank defy months of pressure from President Donald Trump to make a cut.

The Federal Reserve had made its last rate cut in December 2025.

The Fed’s rate increase sparked plenty of chatter that more hikes could be coming, something that was borne out by Wednesday’s Fed minutes.

“With regard to the outlook for monetary policy beyond the current meeting, most participants assessed that another increase in the target range for the federal funds rate would likely be appropriate by year end,” the record said. “Participants emphasized, however, that they approached each meeting with an open mind and decisions at future meetings would depend on incoming information and its implications for the outlook and the balance of risks.”

The CME’s FedWatch tool puts the probability of a hike to between 4% and 4.25% at 17.2% for October’s Fed meeting, with the likelihood rising further to 70.5% for December’s meeting. The tool, which updates in real time, gives a 13.9% likelihood of a December raise to between 4.25% and 4.5%.

The Fed, of course, is dealing with an elevated inflationary environment. The latest Personal Consumption Expenditures data came in cooler than expected last week, but still rose 3.4% year-over-year in August, well above the Fed’s long-term target of 2%.

Daniel Siluk, head of Global Short Duration & Liquidity and Portfolio Manager at Janus Henderson Investors, said that the minutes reflect the Fed’s worries about price stability.

“The September FOMC Minutes revealed a Fed increasingly concerned that inflation is proving more persistent amid resilient economic growth, elevated energy prices, and strong AI-driven investment demand,” he said, in a note. “With labor market risks appearing more balanced and inflation risks skewed to the upside, most officials signaled that additional policy tightening may still be required."

The minutes also offered a glimpse into some of the machinations behind the Fed’s decision. “The striking feature of the FOMC minutes is how many routes led officials to the same conclusion,” said Lale Akoner, Global Market Strategist at etoro, in a note.  

“Some backed higher rates as insurance against inflation picking up again; others thought the strength of the economy already justified them. That makes the case for another hike harder to dismiss, even if the Fed waits for more data first,” she added.