Every Federal Reserve policymaker backed last month's rate hike. Yet traders now see little chance of another hike in October.

Minutes of the Sept. 15-16 Federal Open Market Committee (FOMC) meeting, released Wednesday, show a central bank united on raising rates and leaning toward another hike.

“Most participants assessed that another increase in the target range for the federal funds rate would likely be appropriate by year end,” the minutes said.

Why The Fed Hiked

The minutes describe an economy running hotter than the Fed wants. Inflation, measured by the personal consumption expenditures (PCE) price index, rose to an estimated 3.8% in August.

Core Personal Consumption Expenditures, which excludes food and energy, held at 3.4%. The Fed's target is 2%.

Officials pointed to three sources of pressure: oil prices pushed up by the Middle East conflict, past tariff increases and the artificial-intelligence buildout.

Some participants warned that the AI buildout “could cause aggregate demand to outpace aggregate supply over the medium term,” the minutes said.

In plain terms, companies are spending on data centers and chips faster than the economy can produce what they need, and that lifts prices.

Others worried about what years of high inflation do to behavior.

After “more than five years of inflation above 2 percent,” some officials said, high price gains could start to shape inflation expectations and wage decisions.

Several participants said they saw the current policy rate as “not restrictive or only mildly restrictive.”

In other words, rates may still be too low to slow the economy.

October Hike Odds Have Faded

Markets had been pricing out an October move before the Fed minutes.

According to the CME FedWatch tool, traders now see an 82.8% chance the Fed holds rates at its Oct. 27-28 meeting and a 17.2% chance of a hike.

Those odds had already moved last week after a cooler-than-expected employment report. The minutes do not commit to a date. Officials said they approach “each meeting with an open mind.”

Chances for a hike in December remain as high as 70%.

How Markets Reacted

The 2-year Treasury yield, the one most sensitive to Fed expectations, fell 2.6 basis points to 4.772%.

The 10-year yield was flat at 5.286%. The 30-year yield edged up to 5.668%, near its highest level since May 2002.

The minutes also addressed long-term yields.

Officials said stronger economic data, expectations of heavy AI-related borrowing and geopolitics had pushed them higher. Many said financial conditions still support growth, with stocks up sharply this year and corporate bond spreads narrowing.

The S&P 500 — tracked by the SPDR S&P 500 ETF Trust (SPY) — slipped 0.2% to 7,803.73, and the Nasdaq 100 fell 0.4%. Gold — tracked by the SPDR Gold Shares (GLD) — dropped 1.2% to $4,112 an ounce, while the U.S. dollar index rose 0.4%.