Fed minutes back another hike, but traders doubt exactly three this year

The Federal Reserve’s September meeting minutes, released Wednesday, said most participants considered another rate increase likely by year-end, depending on incoming data. Exactly three hikes this year still look very unlikely to traders. Their broader outlook centers on two increases, with one or two the expected range.

Bets on exactly three hikes fell sharply on Oct. 1 and 2, dropping from an unlikely outcome to a more remote one. Reuters reported that the September jobs report reinforced expectations the Fed would skip a second consecutive hike in October, helping explain the decline. The report showed just 29,000 jobs added, while payrolls for July and August were revised down by a combined 60,000. That cooling labor data weighed on expectations for an October hike, but did not rule out further increases later in the year.

The minutes add nuance to that picture: most Fed participants saw another hike as likely by year-end, but emphasized that decisions depend on new information. On Thursday, Fed Governor Christopher Waller also said further increases might be needed if data supported his outlook, while leaving open a pause at the October meeting. Earlier coverage highlighted other officials’ mixed views, including San Francisco Fed President Mary Daly’s warning that persistent inflation could require more hikes. The minutes reinforce the possibility of further tightening, but do not make three increases a likely outcome.

The Fed raised rates once this year, in September, bringing its target range to 3.75%–4%. Traders favor no change at the October 27–28 meeting and a quarter-point increase in December. The September inflation report is due Oct. 14, and the Fed’s December meeting is its final scheduled rate decision of the year. Inflation and labor-market data, along with officials’ comments, could shift expectations for either meeting. For exactly three hikes to happen, the Fed would need to raise rates twice more before year-end.