Minutes of the September 15-16 meeting said the Fed voted unanimously to raise rates but disagreed on whether the move was insurance against price shocks or a shift toward tighter policy. Most participants saw another increase as likely by year end.
Federal Reserve policymakers were divided last month over why they raised interest rates, even though the vote itself was unanimous, minutes released on Wednesday showed. Reuters reported that some participants treated the quarter-point increase as a way to limit the pass-through of energy and other price shocks. A more hawkish group saw it as protection against inflation that was starting to look demand-driven.
The September 15-16 meeting lifted the policy rate to a 3.75 to 4.00 percent range. The minutes said many participants argued a higher path would be prudent insurance against inflation staying above target if demand proved stronger than expected or if further supply shocks hit. Others backed the higher rate mainly to stop recent energy shocks from spreading into broader prices.
Several participants said the current rate was not restrictive, or only mildly so. Most assessed that another increase would likely be appropriate by year end. Reuters said investors now see the Fed holding the range steady at the October 27-28 meeting and hiking again on December 8-9.
The minutes are a record of the September discussion, not a new decision. Reuters said the same arguments have continued in public remarks and could produce dissents later this month.
People Sentiments Mixed
- Many participants said a higher rate path would provide insurance against inflation staying above target.
- Several participants said the current policy rate was not restrictive or only mildly restrictive.
- Most participants assessed that another increase would likely be appropriate by year end.