The Federal Reserve left its benchmark interest rate unchanged at 3.75% to 4% after a 25‑basis‑point hike in September, marking the first increase since July 2023.
Fed Keeps Rates Unchanged
Policymakers voted 10‑2 to hold rates steady, with Cleveland Fed President Beth Hammack and Governor Lisa Cook dissenting and calling for a rate hike.
Chair Kevin Warsh said the committee continues to “interrogate reality” as it monitors high investment levels, a steady labor market and inflation that has run above the 2% PCE target for nearly six years.
Warsh emphasized that tighter financial conditions for some businesses and households are expected after the September hike, and that market participants are becoming more selective with capital allocation.
Inflation Target Remains Firm
Warsh reiterated that the Fed has no soft inflation target; price stability is defined as 2% measured by the PCE index.
He noted that while oil and gas price spikes have pushed inflation further from target this year, futures prices have risen recently, prompting closer monitoring.
When asked about political considerations, Warsh said the midterm elections played no role in the decision and that the Fed’s next information‑rich interval is unrelated to politics.
Meeting Schedule Overhaul
Starting next year, the FOMC will hold eight meetings annually, with a 2027 session dedicated exclusively to broad monetary policy strategy and no vote on the federal funds rate.
Warsh added that two strategy‑focused meetings are expected in 2028, while the remaining meetings will remain regular policy‑setting sessions.
Market Reaction
The S&P 500 rose 0.26% in the final hour, the Dow edged up 0.28%, and the Nasdaq climbed 0.17% after the October decision.
Outlook and Expert Views
Goldman Sachs’ Kay Haigh expects a December rate hike, citing upside inflation risks from strong CPI data and potential energy price moves.
Principal Asset Management’s Seema Shah said the Fed has time on its side, with anchored inflation expectations and limited second‑round effects, allowing policymakers to wait for more data before tightening further.
The CME FedWatch tool shows an 82.6% probability of a 25‑basis‑point hike at the December 8‑9 meeting, up from 78.3% a day earlier, while the chance of holding steady remains near 16.9%.
