Fed Says More Rate Hikes Likely but Will Hold Timing Open

Overview

• Federal Reserve minutes and recent speeches state that additional increases in the policy rate are likely but the Fed will decide meeting by meeting rather than commit to back-to-back hikes.
• Officials emphasized optionality, with Governor Christopher Waller saying hikes need not occur at consecutive meetings and several policymakers signaling no rush to act before further data arrive.
• Markets have responded by largely pricing in a pause at the next meeting and viewing a quarter-point increase in December as the most probable next move.
• Policymakers singled out unusual inflation pressures from sustained higher energy prices and heavy investment tied to artificial intelligence as reasons to stay vigilant even as some near-term data have softened.
• The Fed began this limited tightening in September with its first rate increase in three years and officials now say they will watch incoming CPI, core PCE and labor reports closely because those readings will determine the timing and size of any further hikes.