Most Fed policymakers do not see September’s rate increase as the last one of 2026. Minutes of the September 15-16 meeting, released October 7, say most participants assessed that another increase in the target range for the federal funds rate would likely be appropriate by year end. The Committee had just raised that range a quarter point, to 3-3/4 to 4 percent, on a 12-0 vote. The wording is an assessment and not a decision, and the next chance to act is a two-day meeting that ends October 28.
How firm the year-end signal is
The minutes give three reasons for the lean toward a second increase. Inflation remained elevated and had not shown sufficient progress lower. A higher rate path was seen as prudent on risk-management grounds. A number of participants called another increase necessary based on their own central forecasts. The minutes give no exact count behind “most.”
The September decision itself moved several of the Fed’s administered rates. The Board raised the interest rate on reserve balances to 3.90 percent and the primary credit rate, which the Fed charges banks that borrow from it, to 4.0 percent, both effective September 17. The overnight reverse repurchase facility, a tool the Fed uses to keep short-term market rates inside its range, was set at an offering rate of 3.75 percent. Those settings are the baseline any new increase would be added to.
For anyone carrying a balance at a variable rate, the question is whether September was the last increase. The Fed’s minutes say that is not the majority view, but they also say participants approach every meeting with an open mind and that decisions depend on incoming information. No one dissented in September. The signal points up, and it is conditional.
The federal funds target range of 3-3/4 to 4 percent is the number that moves next, and the Committee revisits it at every meeting, starting October 27-28.
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The inflation numbers behind the lean toward higher rates
Fed staff estimated that total PCE inflation, the price index the Fed targets, ran at 3.8 percent in August, with core inflation, which leaves out food and energy, at 3.4 percent. Participants generally expected inflation to stay elevated in the near term before declining toward 2 percent over the medium term. The staff’s own forecast for 2026 through 2028 came in somewhat higher than in July, and it has total inflation reaching 2 percent only in 2029.
Several participants went further and viewed the current policy rate as not restrictive or only mildly restrictive, which is the argument for going higher. The economy gave them room: the minutes say activity is expanding at a solid pace, job gains have kept pace with the workforce, and the unemployment rate has changed little. Participants generally judged inflation risks as skewed to the upside and risks to the labor market as broadly balanced, a combination that favors tightening over waiting.
Borrowing costs already in place
The Fed’s separate consumer credit release, published the same day, shows what borrowers already pay. Credit card accounts that were assessed interest carried an average rate of 22.36 percent in August, and the figure across all card accounts was 21.19 percent. A 24-month personal loan averaged 11.90 percent, while 60-month and 72-month new car loans averaged 7.54 and 7.17 percent.
Total consumer credit rose at a seasonally adjusted annual rate of 1.9 percent in August, but revolving credit, which is mostly credit cards, fell at an annual rate of 4.2 percent while nonrevolving credit such as car and student loans grew 4.1 percent. Revolving balances are therefore shrinking in the Fed’s preliminary August data even with card rates above 22 percent for accounts that pay interest. The minutes add that credit card balances grew moderately in the second quarter.
What the Fed does between now and December
The Fed’s own meeting calendar lists two more sessions this year: October 27-28 and December 8-9. Only the December meeting is paired with a new Summary of Economic Projections, the quarterly forecasts in which officials publish their expected path for the policy rate. That makes October the first test of the year-end signal and December the one where officials put individual numbers on it.
Chairman Kevin Warsh and Vice Chair John Williams are listed first among the twelve voters, with Michael Barr, Michelle Bowman, Lisa Cook, Beth Hammack, Philip Jefferson, Neel Kashkari, Lorie Logan, Anna Paulson, Jerome Powell and Christopher Waller. All twelve approved the September statement, so the leaning toward another increase comes from a Committee that was unanimous on the first one and has not yet voted on a second.
The case for a second increase rests on inflation. Participants said it had not shown sufficient progress lower, and staff put August PCE inflation at 3.8 percent, so a run of lower readings before October 27 would weaken the argument while another elevated one would strengthen it. The minutes also list several participants who saw the current rate as not restrictive or only mildly so, which means some policymakers could favor moving even if inflation eases only slowly.
Staff described uncertainty as substantial, and the manager of the Fed’s market operations noted that considerable uncertainty remained about the path of policy at longer horizons. Both statements are in the minutes beside the year-end lean, and the October 28 announcement will show whether incoming inflation data kept it intact.
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This article was produced with AI assistance and reviewed by The Money Overview’s editorial team.
