The minutes show most of the Fed expects another hike this year

The minutes of the September 15–16 FOMC meeting, released October 7, put a number on the hiking bias. “Most participants assessed that another increase in the target range for the federal funds rate would likely be appropriate by year end,” the minutes say. “Many participants emphasized that a higher path for the target range would be prudent on risk-management grounds.”

The minutes also show how the committee sees the policy rate today. “Several participants stated that they viewed the current policy rate as not restrictive or only mildly restrictive.” On inflation, “participants generally assessed inflation risk as skewed to the upside.” Fed staff do not expect inflation to reach 2% until 2029.

What the Beige Book heard from banks

The Beige Book published October 14 covers information through October 5. It says “Higher oil prices permeated all District reports,” and that labor market conditions were little changed. Two Districts reported moderate growth, three modest growth, four slight growth and three no significant change. The banking lines are the ones to read. In Richmond, “competition for core deposits remained strong with institutions struggling to grow their balances.” Kansas City community bankers “noted marginal deterioration across lending categories.”

The committee’s members are not speaking with one voice on timing. Vice Chair for Supervision Michelle Bowman said on October 14 that “I don’t feel any urgency for taking further action at this point.” Chair Warsh gave no signal in Bangkok on October 16. “I don’t prejudge meetings,” he said. The minutes leave little doubt about the direction. The open question is whether the move comes in October or December.

When the Fed says the current rate is barely restrictive, it is telling you that the next move is up and that it may not be the last.