The Fed is about to make its next move. Here are 8 quotes from Jerome Powell and other central bankers that point to what comes next.

After 11 interest rate hikes, Federal Reserve officials appear divided on next steps.
Jerome Powell and other central bankers have signaled another rate hike could be on the table.
Markets predict 97% odds of no rate hike November 1, and 29% odds of a quarter-point hike in December.

In a bid to stamp out the highest inflation in four decades, Federal Reserve officials led by Jerome Powell have made 11 interest rate hikes since March 2022, putting an end to the easy-money era while pressuring the stock market and raising concerns about a coming recession.

Since the Federal Open Market Committee's September meeting, several central bankers have signaled that interest rates could still go higher.

Others at the same time have countered, saying instead that the federal funds rate has likely peaked for this cycle. Recent volatility in the bond market that pushed the 10-year Treasury yield to 5%, as Jerome Powell has noted, may have done some of the Fed's job for it, thus reducing the need for further monetary policy tightening.

Year-over-year inflation hovered at 3.7% in September, still nearly double the Fed's 2% target. Bloomberg's latest poll showed forecasters give 55% odds for a recession in the next 12 months.

Currently, markets see 97% odds of no adjustment at the November 1 meeting of the Federal Open Market Committee, according to CME's FedWatch Tool, which would keep the fed funds rate in the 525-550 basis point range.

In December, traders see 29% odds for a 25-basis-point hike.

Here are eight quotes from policymakers that hint at what could come next.

Monetary policy outlook

1. Philadelphia Fed President, Patrick Harker, October 16: "Absent a stark turn in what I see in the data and hear from contacts...I believe that we are at the point where we can hold rates where they are."

2. Federal Reserve chairman, Jerome Powell, October 19: "Additional evidence of persistently above-trend growth, or that tightness in the labor market is no longer easing, could put further progress on inflation at risk and could warrant further tightening of monetary policy."

3. Atlanta Fed President, Raphael Bostic, October 20: "I really do try to keep people focused on what inflation is, still at 3.7%. Our target is 2. We have to get a lot closer to the 2% [inflation target] before I would consider any relaxation of our posture."

Current financial conditions

4. Federal Reserve chairman, Jerome Powell, October 19: "Financial conditions have tightened significantly in recent months, and longer-term bond yields have been an important driving factor in this tightening. We remain attentive to these developments because persistent changes in financial conditions can have implications for the path of monetary policy."

5. Minneapolis Fed President, Neel Kashkari, October 10: "It's certainly possible that higher long-term yields may do some of the work for us in terms of bringing inflation back down. But if those higher long-term yields are higher because their expectations about what we're going to do has changed, then we might actually need to follow through in their expectations in order to maintain those yields."

6. Dallas Fed President, Lorie Logan, October 9: "If long-term interest rates remain elevated because of higher term premiums, there may be less need to raise the fed funds rate. However, to the extent that strength in the economy is behind the increase in long-term interest rates, the FOMC may need to do more."

Inflation expectations and the labor market

7. Federal Reserve Board of Governors member, Christopher Waller, October 18: "While there is some basis for expecting that inflation will continue to fall, let me remind you, as I have done repeatedly, that we have seen a string of good inflation reports evaporate multiple times in the recent past. So I will be watching the next several reports for clearer indications that inflation is on a trajectory to 2 percent.

8. Boston Fed President, Susan Collins, October 12: "With rates in restrictive territory, I do expect that payroll growth and economic activity more generally will slow in the coming months."

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