Federal Reserve officials lowered their expectations for rate hikes in the years ahead Wednesday but teed up a likely move before the end of 2016.
In a statement from the Federal Open Market Committee after this week's meeting, the central bank expressed confidence in economic growth, but not enough to make a move this month.
"The committee judges that the case for an increase in the federal funds rate has strengthened but decided, for the time being, to wait for further evidence of continued progress toward its objectives," the statement said.
Stock prices initially extended their gains after the Fed announcement but then lost some ground.
The tipoff for what could be a December move came at what appeared to be a remarkably divisive FOMC meeting, judging by the statement and an accompanying summary of economic projections.
Three members from the hawkish Fed bloc — Esther George, Loretta Mester and Eric Rosengren — dissented from the statement, an unusual split considering Chair Janet Yellen's adeptness at keeping the committee united. It was the most "no" votes since the December 2014 meeting.
Indeed, the so-called dot plot that shows individual members' expectations indicated notably wider dispersion than the June meeting. While most Fed officials foresee a gradual increase of rates, one member expected the rate to be little changed from the 0.65 percent level all the way through 2019. Another member, meanwhile, put the rate expectation at 3.75 percent by 2019, more than a percentage point above the consensus.
Three members also indicated they do not want any hikes this year.
"The solid coalition is still going to be there with Yellen, (William) Dudley, (Stanley) Fischer and a handful of others. I think they're still all in agreement," said Kathy Jones, chief fixed income strategist at Charles Schwab. "I can only surmise there's a division between those who think that we are in this secular stagnation world — slow growth for a longer time — vs. those who think it's a cyclical issue that's taking a very long time to play out."
The increase likely would come at the Dec. 13 and 14 meeting, considering the Nov. 1 and 2 session comes just ahead of the presidential election and there is no post-meeting news conference scheduled.
"Most people were expecting some version of this, the idea that they weren't actually going to hike rates but they didn't want the notion that the Fed is never going to hike," said Lewis Alexander, the chief U.S. economist at Nomura. "This pretty much met those expectations."