The minutes from the September 15-16 meeting dropped Wednesday, confirming what traders suspected: the Fed isn't done tightening. Officials unanimously agreed that inflation has failed to make meaningful progress toward the 2% target, pushing the key policy rate to approximately 3.9%. This was the first increase in three years, a move that directly contradicted President Donald Trump’s repeated demands for cuts.
The political friction is palpable. Trump, who appointed Chairman Kevin Warsh earlier this year, criticized the committee’s hawkish stance but stopped short of withdrawing his support for Warsh. The timing is politically toxic with midterm elections just seven weeks away. Affordability—groceries, gas, housing—is the voter’s primary pain point, and the Fed’s decision to hike rather than cut has made central bank policy a campaign weapon.
But the rate hike wasn’t the only driver behind the spike in borrowing costs. Long-term mortgage rates have surged due to a convergence of factors: rising US government debt, massive corporate borrowing by tech giants for data center infrastructure, and elevated oil and gas prices. The Fed’s 25bps move likely played a limited role in this broader surge, according to market analysts.
So, what’s next? Key policymakers have signaled they need time to digest the impact of the September hike. Wall Street futures pricing currently bets on a hold at the October 28-29 meeting, with the next 25bps increase expected in December. For investors, the message is clear: the 'lower for longer' era is officially over.