Federal Reserve Keeps Policy Rate Unchanged at 3.75%-4% Ahead of Midterms
The U.S. central bank left its benchmark rate steady, citing persistent inflation and a desire for more data before deciding on future moves.
The Federal Reserve announced on Thursday that it will maintain its target range for the federal funds rate at 3.75%-4%, a decision made just days before the upcoming midterm elections. The move follows a rate increase at the September meeting, the first hike in three years.
Fed Chair Kevin Warsh said the monetary policy actions taken in September are beginning to show results, adding that inflation remains too high but other indicators, such as tightening credit conditions, suggest the economy is on a favorable path. He noted that additional economic data expected before the next policy meeting in December will help the Fed determine the appropriate stance.
The vote to hold rates was not unanimous; ten of the twelve committee members supported the hold, while Governor Lisa Cook and Cleveland Fed President Beth Hammack voted for a further increase to a 4%-4.25% range.
"The overwhelming consensus, the overwhelming judgement, is that what we've done in this monetary medicine is starting to work some," Warsh said.
"A lot of things can happen, so I'm not going to be able to share with you my musings," he added when asked about the likelihood of another hike.
The Fed reiterated its dual mandate of achieving 2% inflation and stable employment, explaining that unchanged rates mean borrowing costs for mortgages, credit cards and business loans are likely to stay steady, while returns on cash savings are unlikely to rise.
Analysts note that the current rate level mirrors the range seen during the early stages of the 2008 financial crisis, after a period of historically low rates during the pandemic. The next policy decision is scheduled for 8-9 December.