Policymakers unanimously lifted the federal funds rate to 3.75%–4% on 16 September, reversing cuts made since 2024. Officials remain divided over whether further tightening will be needed. Mortgage rates have already climbed to 6.95%, their highest since January 2025.
Alberto Musalem said persistent demand and supply shocks have kept inflation too high for too long. Traders still expect the Fed to hold rates steady in October, but see nearly 70% odds of another increase in December.
All 19 officials backed lifting the benchmark rate to between 3.75% and 4%. Most see another rise by year end as likely, though markets have since cut the odds of an October hike to around 20%.
The Fed's benchmark rate is now 3.75% to 4%, after a unanimous vote under chair Kevin Warsh. Inflation stands at 3.4%, well above the Fed's 2% target, and borrowing costs are expected to rise.
Markets put the odds of a quarter-point rise on Wednesday at above 92%, with inflation still running at 3.4%. A further increase in December is seen as more likely than not, with CNBC putting the odds at above 75%.
The bank called such a move 'very unlikely' as recently as last month. Hotter-than-expected August inflation data has since pushed market odds of a quarter-point hike to around 88%.
Type at least two characters.
