Fed Holds Benchmark Rate Steady as Inflation Remains Elevated
The Federal Reserve voted 10-2 to keep the federal funds rate at 3.75%-4% amid persistent inflation, while two members dissented and called for a hike.
The Federal Reserve's policy committee voted 10-2 on Wednesday to leave the federal funds rate unchanged in its target range of 3.75% to 4%, after a 25-basis-point increase in September. The decision reflects the board's view that inflation is still above the 2% target and that more data are needed before further action.
In its statement, the Federal Open Market Committee said economic activity is expanding strongly, with robust productivity growth, capital investment and job growth that "kept pace with the workforce," while the unemployment rate has changed little. The committee noted that inflation remains elevated and that additional information will help determine the appropriate policy stance to achieve price stability.
Cleveland Fed President Beth Hammack and Governor Lisa Cook were the two dissenting votes, each favoring another 25-basis-point hike. Fed Chair Kevin Warsh said policymakers continue to "interrogate reality" as they assess conditions, noting a "quite positive" labor market but acknowledging that inflation has run above the committee's goal for nearly six years. He added that the September rate increase has tightened financial and credit conditions for some businesses and households, as expected.
Warsh also outlined upcoming changes to the FOMC meeting schedule, indicating that starting next year the committee will hold eight meetings annually, with one in 2027 dedicated solely to broad monetary-policy strategy and no vote on rates. He said a similar strategic meeting is planned for 2028, emphasizing the importance of dedicated time for long-term deliberations.
When asked whether politics influenced the decision, Warsh said the midterm elections were not discussed and had no role in the outcome. He reaffirmed the Fed's 2% price-stability target and said there is no "soft" or implicit inflation target.
Market analysts noted that the Fed may resume rate hikes later in the year if inflation pressures persist. The next policy meeting is scheduled for Dec. 8-9, with market expectations leaning toward a 25-basis-point increase.