The Fed Holds Rates but Two Officials Wanted a Hike

Keypoints:

• The Federal Reserve kept rates at 3.75% to 4.00% on Wednesday
• The vote was 10 to 2, with Governor Lisa Cook and Cleveland Fed President Beth Hammack voting for a hike
• Chair Kevin Warsh would not say what happens in December
• Markets now see up to an 83% chance of a hike in December
• Warsh announced the Fed will hold fewer rate-setting meetings in future years

The US Federal Reserve did what everyone expected on Wednesday and left interest rates alone. The surprise was the vote. Two of the 12 voters wanted to raise rates right away.

Rates stay at 3.75% to 4.00% after a quarter point hike in September, which was the first increase in three years. Governor Lisa Cook and Cleveland Fed President Beth Hammack both voted for another hike. Ten others voted to hold. In its statement, the Fed said patience would help it see whether inflation is returning to its 2% goal in a timely way.

At his press conference, Chair Kevin Warsh said growth is strong and the job market has been quite positive, but he also made clear that inflation is too high. He refused to prejudge what the Fed will do in December and called the coming weeks full of information. That is typical for Warsh. He has repeated that he does not like forward guidance, which is when central bankers hint at future moves, and he said he will avoid it absent a crisis.

The market took the hint anyway. Traders now put the odds of a December rate hike as high as 83%. The 10-year Treasury yield closed near 5.04%. Stocks edged up and the reaction was calm, partly because the decision was so widely expected.

There was one real surprise. Warsh said the Fed will change how it meets. One meeting in 2027 and two in 2028 will focus only on big picture strategy. At those meetings, he said, he does not expect a rate decision or a policy statement. That means fewer scheduled chances to change rates.

So what does this mean for regular people? A hold keeps borrowing costs where they are for now. The risk is that a December hike could push loan and credit card rates higher, while savers could earn a bit more.

The next decision comes on December 9 along with fresh economic projections. Until then, markets will be reading every new inflation number for clues.