Fed minutes point to another US rate rise by year-end

Most Federal Reserve policymakers expect to raise US interest rates again before the end of the year, the minutes of the Federal Open Market Committee's 15 and 16 September meeting, released on 7 October, show.

For central banks in emerging markets that meet in the second half of October, the minutes set the external backdrop: a Fed that has started tightening and does not regard its current setting as especially tight. This analysis sets out what the minutes say and how three central banks in the region, in Kuwait, Ukraine and Hungary, have described their own positions in relation to the global turn.

What the minutes say

All participants supported raising the federal funds target range by a quarter point to 3.75 per cent to 4 per cent. Almost all judged that inflation risks were tilted to the upside while risks to the labour market had diminished and were broadly balanced. Many said a higher path for rates would be prudent on risk-management grounds, providing insurance against inflation staying above target, and a number said a higher path was needed on their central forecasts alone, the minutes say.

Several participants said they viewed the policy rate as "not restrictive or only mildly restrictive", and a couple said they had raised their estimates of the neutral rate. On the outlook, "most participants assessed that another increase in the target range for the federal funds rate would likely be appropriate by year end", while stressing that decisions would depend on incoming data. The minutes also record participants noting a rise in longer-term Treasury yields, which a few participants linked to stronger data, expectations of AI-related borrowing and geopolitical developments. The committee's next meetings are on 27 and 28 October and on 8 and 9 December, the Fed calendar shows.

Kuwait: a basket gives room to wait

The Central Bank of Kuwait kept its discount rate at 3.5 per cent on 16 September, the day of the Fed's increase, and said in its statement that prevailing monetary conditions were consistent with domestic conditions. Its latitude comes partly from its currency regime. Since 20 May 2007 the dinar has been pegged to an undisclosed weighted basket of the currencies of Kuwait's main trade and financial partners, rather than to the dollar alone, the bank's exchange rate policy page says. The dinar averaged 306.4 fils per dollar in 2025, against 306.67 fils in 2024, the same page shows.

If the Fed moves again by December, as most of its policymakers expect, the gap between Kuwait's discount rate and US policy rates would widen further. Whether the Kuwaiti bank continues to hold will show how much of that gap it is prepared to tolerate under a basket peg.

Ukraine and Hungary: explicit references to the global turn

The National Bank of Ukraine raised its key policy rate by half a point to 16 per cent on 17 September. In its statement it said the global price environment remained pro-inflationary and that "an increasing number of central banks are raising their key rates". Its next decision is due on 29 October, the day after the Fed's, the NBU said.

Hungary's central bank held its base rate at 5.50 per cent on 22 September and noted in its statement that the European Central Bank, the Fed and the Bank of Japan had each raised rates by 25 basis points in September, with market pricing pointing to further increases from all three. It said high energy prices and an uncertain global environment warranted a careful approach, even with inflation below its target.

The minutes do not commit the Fed to an October move; participants said they would approach each meeting with an open mind. But the language on a further increase "by year end", combined with several participants describing policy as only mildly restrictive, suggests that the external pressure on emerging-market central banks will not ease at the October meeting.

Kuwait issued its September statement on the day of the Fed's decision, so the 28 October outcome is the first input for its next assessment. For Ukraine, the NBU decides a day later with its own inflation problem to address. Hungary's central bank has already cited the uncertain global environment and high energy prices as reasons for caution. In each case the minutes reduce the chance that the global backdrop turns supportive in the remaining weeks of the year.