A majority of Federal Open Market Committee members believe that at least one more increase in the federal funds rate will be necessary to return inflation to the Federal Reserve’s 2% target, according to minutes from the FOMC’s September meeting, released today. The minutes also showed that several committee members worried that a looming government shutdown could slow the release of data that they use to assess economic conditions.
The committee decided to leave the rate’s target range at 5.25% to 5.5% at their last meeting. According to the minutes, participants noted that while consumer spending has shown continued strength, the finances of some households were being strained by high inflation and declining savings, with the recent resumption of student loan payments further tightening some budgets. They also viewed higher interest rates and constrained access to bank credit as likely to dampen business activity in the coming months. At the same time, participants saw the labor market as coming into “better balance” with declines in both job openings and quit rates, and the average number of weekly hours worked returning to pre-pandemic levels.
As for the future, FOMC members saw a high degree of uncertainty surrounding the economic outlook. Several participants said that a government shutdown might result in the delayed release of some economic data “and that this outcome would make it more difficult to assess economic conditions.” Congress approved a continuing resolution in early October to fund the federal government at current levels through Nov. 17. The FOMC next meets Oct. 31-Nov. 1.