Investors now expect the Fed to opt for a half-point rate hike at the December meeting, bringing the target range for the benchmark to 4.25% to 4.5%.
Economists surveyed by Bloomberg still see a US recession as more likely than not in the next 12 months.
A pickup in so-called core inflation in August has become a cause for concern among Fed officials.
“Monetary policy will need to be restrictive for some time," Fed Vice Chair Lael Brainard said.
Their remarks maintain Chair Jerome Powell's message last week that they will not flinch from confronting inflation.
Chicago Fed President Charles Evans said the Fed still might be able to avoid a recession.
Markets are bracing for rates to be raised to levels not seen since before the 2008 financial crisis.
Shelter costs are the largest component of the consumer price index.
It will take a while for rents to settle back down to pre-pandemic norms.
Chicago Fed President Charles Evans says policy makers could deliver a third straight jumbo increase.
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