Fed minutes indicate another interest rate increase may be made this year

The Fed published the minutes of the meeting of the Federal Open Market Committee (FOMC) held on September 15-16.

The minutes of the last meeting, where the policy rate was increased by 25 basis points to the range of 3.75-4 percent in line with expectations, showed that another interest rate increase could be made this year.

While Fed officials generally stated that inflation risks are upward, some officials noted that these risks have increased in recent months.

Some officials have warned that artificial intelligence infrastructure investments will cause total demand to exceed total supply in the medium term, which may put upward pressure on inflation. Some officials also shared the view that the scale and speed of development in artificial intelligence infrastructure continues to surprise on the upside.

While authorities pointed out that they generally expect labor market conditions to remain stable and the unemployment rate to remain close to current levels, they evaluated that the risks to the labor market are largely balanced.

Most officials also agreed that financial conditions appear supportive of economic growth, despite the recent rise in long-term Treasury bond yields.

"All officials supported the interest rate increase"

In the minutes, which reminded that all officials supported an increase in the policy rate by 25 basis points at the September meeting, the following was recorded:

"Overall, officials emphasized that inflation remains high, the labor market remains close to full employment with signs of strengthening, and economic activity is expanding at a solid pace. Additionally, almost all officials assessed that, although inflation risks trend upward, risks to the labor market have decreased and are now generally balanced. Based on the outlook and the changing balance of risks, all participants deemed a higher target range for the federal funds rate appropriate."

It was emphasized that this would support inflation returning to the FOMC's 2 percent target.

"Most officials assessed that, regarding the monetary policy outlook beyond the current meeting, it would likely be appropriate to make another increase in the federal funds rate target range by the end of the year," the minutes said, indicating that several officials did not find the current policy rate restrictive or only mildly restrictive. The statement was included.

Regarding balance sheet policy, several officials noted that treasury markets were functioning smoothly, but noted the importance of planning against market stress.