FOMC Minutes to Shed Light on 2026 Rate-Hike Plans

The upcoming economic week is set to be relatively calm, with the release of the Federal Open Market Committee (FOMC) minutes on Wednesday being the key event. Last week’s economic indicators were mostly strong, with the unemployment rate falling to near a 57-year low and private payrolls rising by 90,000 in September. However, Friday’s employment report was a disappointment, showing only a 29,000 increase in jobs, well below expectations, and downward revisions for July and August by a combined 60,000.

The odds of a 25 basis point (bps) hike in the federal funds rate at the October 27-28 FOMC meeting have dropped to 22%, with a 67% chance of a hike in December. The market still anticipates one rate hike this year but has ruled out the possibility of two. However, some analysts believe the Fed should raise rates enough to reverse last year’s three 25bps “insurance” cuts.

The FOMC minutes from the September meeting are expected to provide insights into the Committee’s stance on tightening monetary policy beyond what the dot plot in the Summary of Economic Projections suggests. The median projection indicates one more 25bps hike in 2026, followed by a hold throughout 2027. Fed Chair Kevin Warsh noted that the September hike 'removed a dose of accommodation,' implying the federal funds rate remains below the neutral rate.

Other notable events this week include the release of the S&P Global flash Purchasing Managers’ Index (PMI) for September, which jumped to 58.7 from 56.5 in August, suggesting strong economic activity. Additionally, the ADP employment report and jobless claims data will be closely watched for further insights into the labor market. Globally, Eurozone retail sales data and a speech by Bank of England Governor Andrew Bailey could provide clues about future monetary policy moves.