The Fed Meets Today and Is Expected to Press Pause on Rates

Keypoints:

• The US Federal Reserve will announce its decision at 2 p.m. Eastern time today
• Markets expect rates to stay at 3.75% to 4.00%
• The Fed raised rates by a quarter point in September, its first hike in three years
• Futures markets show odds above 80% of another hike in December
• Chair Kevin Warsh holds a press conference 30 minutes after the decision

The Federal Reserve wraps up its two day meeting today, and almost everyone expects it to leave interest rates alone. The decision comes at 2 p.m. Eastern time, followed by a press conference with Chair Kevin Warsh at 2:30 p.m.

The expected move is no move. Rates are expected to stay at 3.75% to 4.00%. In September the Fed raised rates by a quarter point, the first increase in three years. Fed funds futures put the chance of another hike this week at less than 10%.

Why pause when inflation is still above the Fed's 2% goal? Several officials have said hikes do not need to happen at every meeting. A pause gives them time to see whether the recent hot inflation numbers are just a blip or a real trend. The job market is also holding up fairly well, and higher energy costs are making the inflation picture more complicated.

The real drama is about December. Futures markets show odds above 80% that the Fed will raise rates again then. Some analysts expect Warsh to hint that more hikes are coming. But he has said he prefers not to give markets advance guidance, so he may keep his cards close. There will also be no new projections from officials this time. The next ones arrive with the December 8 and 9 meeting.

What does it mean for regular people? The Fed's rate steers borrowing costs across the economy. The prime rate, which many credit cards and some loans follow, usually sits about three percentage points above the Fed's rate. A hold means those costs stay about where they are, while a December hike could push them higher. Higher rates also tend to pay savers a little more.

Remember that all of this is a forecast, not a guarantee. The wording of the statement, any officials who disagree and Warsh's answers could move markets more than the decision itself.