Fed minutes: most officials saw another hike likely by year end
Minutes of the Sept. 15-16 meeting, released Oct. 7, show every participant backed the quarter-point increase and most expected one more in 2026. The 30-year mortgage average reached 7.40% the next day.
By American Policy WireFiled
The bottom line A Fed majority leaning toward one more increase in 2026 keeps pressure on the long-term yields that set mortgage rates, now above 7%.
Every Fed official at the September meeting backed raising rates, and most expected to do it again before 2026 is over, according to minutes released Wednesday [1, 2]. One day later, Freddie Mac’s 30-year fixed average climbed to 7.40%, up from 6.76% in the last survey before the hike [3, 5].
Why it matters: The minutes are the clearest sign yet of where the committee was heading after its Sept. 16 move to 3.75% to 4%, which this site covered at the time [1]. A majority that sees one more increase as likely gives bond markets little reason to price in relief, and mortgage rates track those markets.
What the minutes say: “Most participants assessed that another increase in the target range for the federal funds rate would likely be appropriate by year end,” the document reads [1]. Officials added that they approached each meeting “with an open mind” [1].
The reasons were inflation and a firmer job market. Fed staff estimated the 12-month change in the PCE price index at 3.8% for August, with core at 3.4% [1]. Under the new Bureau of Economic Analysis method due at the end of September, staff put those figures at 3.6% and 3.2% [1]. Either way, both readings were higher than a year earlier, which staff tied mostly to past tariff increases, energy and input costs, and pricier technology goods linked to the AI buildout [1]. Staff did not expect inflation to reach 2% until 2029 and said its forecast for 2026 through 2028 was somewhat higher than in July [1]. Officials cited energy prices pushed up by geopolitical events, the build-out of artificial intelligence infrastructure, and the chance of new tariffs as upside risks [1].
Several participants said they saw the current rate as “not restrictive or only mildly restrictive,” and a couple had raised their estimate of the neutral rate [1]. Many described a higher path as insurance against inflation staying above target [1].
By the numbers
- 7.40%: The 30-year fixed average on Oct. 8, up from 7.28% on Oct. 1 and 6.30% a year earlier [3, 4, 6].
- 64 basis points: How far the 30-year average has risen since the Sept. 10 survey, the last one before the hike, when it stood at 6.76% [3, 5].
- 6.73%: The 15-year fixed average on Oct. 8, against 5.53% a year ago [3, 6].
- About 35 basis points: The rise in nominal Treasury yields across the 2- to 10-year range between the July and September meetings, according to the manager of the Fed’s System Open Market Account [1].
- 4.1%: The unemployment rate in July and August, as reported to the committee [1].
What did the Fed say about mortgage rates and housing?
Staff told officials that residential mortgage rates “increased a bit more than 10-year Treasury yields” over the period between meetings [1]. Financing conditions were described as “somewhat restrictive for residential mortgage borrowers and small businesses,” and borrowing to buy homes “remained depressed,” though home equity borrowing stayed near pre-pandemic levels [1]. A few officials singled out housing as a sector where financial conditions were not supporting activity [1].
What it means for buyers and owners:
- Higher payments are already here. The 30-year average is about 1.1 percentage points above its level a year ago [3, 6].
- The Fed’s mortgage bonds keep running off. The directive approved in September has the New York Fed reinvest principal from its agency securities into Treasury bills, not new mortgage-backed securities [1].
- Home equity borrowing is holding up even as purchase borrowing lags, according to staff [1].
- Lower-income households face more strain. Several officials noted higher energy prices weighing hardest on low- and moderate-income families [1].
What’s next: The committee meets again Oct. 27-28 [1]. The minutes for each regular meeting generally come out three weeks after the decision [2].
The other side: The minutes predate a softer jobs picture. 10News reported that the September jobs report, released Oct. 2, showed employers added just 29,000 jobs and unemployment rose to 4.2%, and that investors were betting on a hold later this month [7]. Inside the meeting, some participants had already argued that aggregate wage growth was moderate and that the labor market “was not currently a source of inflationary pressures” [1]. The year-end phrasing also leaves December open as the month for any further move, 10News noted [7].
Q&A Quick answers
- Q1What did the September 2026 Fed minutes say about another rate hike?
- Most participants judged another increase would likely be appropriate by year end, the minutes say, while stressing that each decision depends on incoming data [1].
- Q2When is the next Fed meeting after the September 2026 hike?
- The committee agreed to meet Tuesday and Wednesday, Oct. 27-28, 2026 [1]. 10News reported that investors were betting on a hold at that meeting after a weak September jobs report [7].
- Q3What is the average 30-year mortgage rate on October 8, 2026?
- Freddie Mac's weekly average was 7.40%, up from 7.28% a week earlier and 6.30% a year ago [3, 4, 6]. The 15-year averaged 6.73% [3].
- Q4Did the Fed minutes mention housing or mortgages?
- Yes. Staff called financing conditions somewhat restrictive for residential mortgage borrowers and said borrowing for home purchases remained depressed [1]. A few officials said housing was a sector where financial conditions did not appear supportive of activity [1].
- Q5Is the Fed still shrinking its mortgage-backed securities holdings?
- The September directive tells the New York Fed to reinvest all principal payments from its agency securities into Treasury bills, rather than back into mortgage bonds [1].