Fed Keeps Rates Unchanged as Chair Warsh Highlights Inflation Risks and Economic Strength

The Federal Reserve left its benchmark interest rate unchanged at the 3.75%-4.00% range after the October meeting, citing a need for more information to guide policy. Chair Kevin Warsh told reporters that the Committee sees a strengthening economy, with third-quarter GDP expected above 3%, double-digit growth in business investment and payroll growth outpacing last year. He emphasized that “our responsibility is to get inflation down” and that inflation expectations must stay anchored.

Warsh noted that credit conditions have tightened but the Fed is “unwilling and unable to call financial conditions tight.” He said the central bank’s “new monetary medicine,” including a recent reduction in accommodation, is beginning to work, and that the period ahead will be “information-rich.”

The FOMC vote was 10-2, with Governor Lisa Cook and Cleveland Fed President Beth Hammack dissenting in favor of a 25-basis-point hike. Market reaction was muted, with the U.S. dollar index hovering in the low-102 range.

Analysts expect attention to focus on Warsh’s comments for clues about a possible rate move in December, as the Fed balances elevated inflation, solid growth and tightening financial conditions. The central bank also announced a change to its meeting schedule, planning eight meetings per year with one non-voting session dedicated to strategic deliberations.