Federal Reserve policymakers anticipate another interest-rate increase before 2026 ends, September meeting minutes published Wednesday showed, although they left the timing for the move open. Market pricing favors an October hold followed by a December increase, as investors weigh persistent inflation against weaker hiring.
CME FedWatch readings dated Oct. 8, 2026, put the likelihood of unchanged rates at this month’s meeting at 81.7%. For December, the probability of an increase by 25-basis point stood at 66%, compared with 20% for no change and almost 14% for a half-percentage-point increase.
The September employment report, published last week, showed a substantial slowdown in hiring. Payrolls expanded by 29,000, well below the previous month’s gain and less than half the nearly 70,000 jobs economists had anticipated. The unemployment rate edged up to 4.2%.
Healthcare accounted for 17,000 of the additional jobs, while employment declined across information services, finance and professional industries, Bureau of Labor Statistics figures showed. The report was the last employment release before the midterm election and pointed to a cooling jobs market.
Inflation readings also came in considerably below forecasts, though they remained above the Fed’s goal. In August, the personal consumption expenditures price index, the central bank’s preferred inflation measure, registered a 3.4% headline rate and a 3% core rate. Adjustments to the calculation of some components contributed to the lower-than-expected figures.
Taken alongside recent remarks from senior Fed officials, those inflation results suggest an October increase is unlikely. Neither measure, however, was close to the central bank’s 2% objective, and inflation has exceeded that target for over five years.
At the September meeting, policymakers approved a quarter-percentage-point increase without dissent. That agreement came after earlier signals that several prominent officials were hesitant about raising borrowing costs.
The deliberations reflected concerns that inflation could remain difficult to bring down. Officials also assessed employment as near its maximum sustainable level and described an acceleration in overall economic growth. Their expectation of another increase rested on continued price pressures and a labor market they viewed as stable.
Forecast submissions showed broad support for further tightening: 16 of the 18 Federal Open Market Committee officials who provided projections anticipated an additional increase. The committee’s collective outlook called for one more hike during 2026, followed by no increases in 2027.
The minutes did not identify which meeting might deliver the next move. Policymakers have two scheduled rate decisions remaining this year, on Oct. 28 and Dec. 9.
