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Fed Officials See More Work to Tackle Persistent Inflation
Confirmed
In Short: Federal Reserve officials concluded they need to do more to quell inflation after raising interest rates in September.
Federal Reserve officials concluded they need to do more to quell inflation after raising interest rates in September, according to minutes from the meeting released on Wednesday.
The minutes showed policymakers increasingly focused on upside inflation risks, a resilient economy, and the possibility that strong AI investment could add to demand pressures.
Participants noted that total PCE inflation was estimated at 3.8% in August and core PCE at 3.4%, with officials describing risks to the inflation outlook as skewed to the upside.
Many officials emphasized that a higher path for the target range would be prudent on risk-management grounds, providing insurance against inflation remaining persistently above target due to stronger-than-expected demand or further adverse supply shocks.
Some officials suggested that raising rates was necessary based solely on the current outlook for price pressures.
The minutes also highlighted that the September hike was supported unanimously, and further tightening remained the most likely path if inflation fails to moderate.
According to the Bureau of Labor Statistics, food costs have risen 29% since 2020, driven by a mix of inflation, tariffs, labor costs, and ongoing supply chain issues.
Officials noted that inflation was stable on the month, but the trend was revised lower, with core inflation matching expectations at 2.5%.
The minutes reinforced a hawkish policy bias, with almost all participants seeing inflation risks tilted to the upside, and some saying those risks had become more pronounced recently.
Some officials also suggested that raising rates would guard against the public’s losing confidence that inflation, which has overshot the Fed’s 2% target for nearly six years, would eventually ease.
The Fed’s preferred measure of inflation, when volatile food and energy costs are factored out, increased 3.0% from one year ago, below expectations.
Officials grew increasingly concerned about inflation risks at their most recent meeting in September, with many wanting rates to stay at or above the current level throughout 2027.
What this adds
The report adds that the Fed's decision to raise interest rates in September was supported unanimously, and further tightening remains the most likely path if inflation fails to moderate.
What's confirmed
- The minutes stated that "many participants emphasized that a higher path for the target range would be prudent on risk-management grounds, providing insurance against inflation remaining persistently above target due to stronger-than-expected demand or further adverse supply shocks." Inflation was a central concern throughout the meeting.
- But changing the policy after the next general election could free up money for other Government priorities at a time when ministers are considering how to tackle the long-running pressures facing social care.
- The triple lock ensures the state pension rises each year by whichever is highest out of inflation, average wage growth or 2.5 per cent.
What's still developing
- US Personal Consumption Expenditures (PCE) Prices Index revealed that inflation remained steady in August, providing some leeway for the bank to take some time to better assess the impact of September’s rate hike before tightening monetary policy further.
- The rising rates come as property market activity shows signs of weakening, with inflation currently running at 3.1%.
- “Raising rates to weaken demand doesn’t address the root cause behind supply shock-driven inflation,” Tom Barkin, president of the Federal Reserve Bank of Richmond, said back in May.
- First, she mentions that they should not put "too much emphasis" on the inflation numbers due tomorrow.
- And lastly, she says that the rate hike today could even be the last for this year if further upside risks to inflation do not materialise or grow any deeper.
- Openings hit their lowest level since March and pay growth trails inflation, leaving employers weighing hiring plans U.S. employers added just 29,000 jobs in September 2026 and the unemployment rate rose to 4.2%, according to the Bureau of Labor Statistics (BLS) in Washington, D.C.
- "This stability has helped keep consumers spending, but with wages trailing inflation since April... that means fewer chances to move to a better-paying job," Friel said.
- The Bank of Japan raised interest rates to a more than 30-year high on Friday and said it would lift them further as it looks to counter inflation fuelled by surging energy prices and a weak yen.
- Core inflation fell to 1.7 percent in August from 1.8 percent but remains close to the BoJ's two percent target.
- Bessent defended his controversial bond-buyback program before Congress on September 15, clashing with Democrats over whether tariffs are driving inflation as the economy confronts 10-year Treasury yields topping 5 percent for the first time since 2007.
- Bessent defended the buyback strategy methodically, while lawmakers from both parties pressed him on inflation, tariffs, and America's international standing.
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