Investing.com – Most Federal Reserve policymakers agreed that one more rate hikes would be "appropriate" and emphasized the need to keep interest rates higher for longer as inflation continues to trend well above the central bank’s 2% target, the Fed’s September meeting minutes showed Wednesday.
At the conclusion of its previous meeting on Sept. 20, the Federal Open Market Committee kept its benchmark rate steady at range of 5.25% to 5.5%.
"A majority of participants judged that one more increase in the target federal funds rate at a future meeting would likely be appropriate, while some judged it likely that no further increases would be warranted," the Fed minutes showed.
At the meeting, Fed members doubled down on the central bank’s plan to keep rates elevated for much longer than previously expected after maintaining their forecast for another rate hike this year and reducing the number of rate cuts expected in 2024 to just two from four previously.
"All participants agreed that policy should remain restrictive for some time until the Committee is confident that inflation is moving down sustainably toward its objective," the minutes showed.
In weeks since the Fed meeting, some members are now leaning more cautiously on further rate hikes following a sharp rise in Treasury yields, particularly longer-term rates, that have tightened financial conditions and are expected to dent growth, helping the Fed to curb inflation.
Fed members are “in a position to proceed carefully in assessing the extent of any additional policy firming that may be necessary,” Federal Reserve Vice Chair Philip Jefferson said Monday in remarks prepared for a speech at a National Association for Business Economics conference in Dallas.
“I will remain cognizant of the tightening in financial conditions through higher bond yields and will keep that in mind as I assess the future path of policy,” Jefferson added.
While expectations for a rate hike in November remain low at 12%, according to Investing.com’s Fed Rate Monitor Tool, the consumer inflation report due Thursday could all but seal the decision.
“It’s the last CPI reading before the next FOMC decision on November 1st and therefore it could be impactful to markets that are pricing little to no chance at a hike at that meeting,” Scotiabank (TSX:BNS) Economics said in a recent note.
The yield on the 10-year Treasury and 30-year Treasury touched a 16-year high of 4.8% and 5.0% respectively last week, as the Fed’s higher- rate- for- longer message bolstered the term premium, or the compensation for the risk of holding a long bond given uncertainty about interest rate changes.
“The extent and speed of the move means negative economic consequences cannot be excluded,” BNP Baribas wrote in an online article.