Economists seem to be confident that the Fed is finished raising interest rates, but a closer look at its members' rhetoric reveals a not-so-unanimous stance.

In fact, the Fed’s 12-member policy committee is largely divided on how to proceed with interest rates, according to the minutes of the central bank’s Sept. 19-20 meeting.

“A majority of participants judged that one more increase in the target federal-funds rate at a future meeting would likely be appropriate, while some judged it likely that no further increases would be warranted,” the minutes, which were released last week, said.

While the minutes are more like hearsay than the final say, they do urge caution for anyone who thinks they have the Fed figured out.

Central bankers are under enormous pressure to bring down inflation without tipping the economy into recession. This so-called “soft landing” will be tricky to execute, according to economists.

“When everyone expects a soft landing, brace for impact,” wrote Bloomberg economists Anna Wong and Tom Orlik. “That’s the lesson of recent economic history—and it’s an uncomfortable one for the U.S. right now.”

The bond market complicates things

At the September meeting, Fed officials forecast one more rate hike this year, but that was before long-term bond yields spiked to 16-year highs.

Bond yields are important to the Fed because most credit products, such as mortgages or auto loans, are directly or indirectly benchmarked against them. So, if bond yields rise, so do financing costs across the economy.

By the Fed’s own admission, rising bond yields are doing the central bank’s work.

“Financial markets are tightening up, and they are going to do some of the work for us,” Fed governor Christopher Waller told a conference in Utah on Oct. 11. “We’re in this position where we kind of watch and see what happens on rates.”

At least two of Waller’s colleagues—Fed vice chair Philip Jefferson and Lorie Logan of the Dallas Fed Bank—made similar statements last week.

Markets have taken the Fed officials at their word and have lowered the odds of a rate hike next month to less than 10%, according to CME Group’s FedWatch tool. Beyond that, however, predicting the Fed’s next move is a fool’s errand.

A sticky situation

Last month, benchmark measures of consumer and producer prices rose more than expected, fueling concerns that persistently high inflation isn’t going away anytime soon.

Economists at Vanguard say “sticky” inflation is almost everywhere and that the Fed still has more work to do before the inflation genie is back in the bottle.

"We've always said inflation wouldn't come down magically, even as post-pandemic supply chain issues were resolved,” said Vanguard economist Andrew Patterson in the investment manager’s midyear economic outlook.

While the report was released before the most recent spike in Treasury yields, Patterson’s comments remain relevant today because inflation isn't expected to go away anytime soon.

Even by the Fed’s own calculations, inflation will estimatedly remain above its 2% target for the next three years. This means it’s probably too premature to completely rule out further rate hikes.