- The Federal Reserve held its benchmark rate in the 3.75% to 4% range on Wednesday, as markets widely expected, with the committee saying “the accumulation of more information” will help it determine the right stance to return inflation to 2%.
- The dissents were the surprise. Governor Lisa Cook voted no, her first dissent since joining the Board in 2022, and Cleveland Fed President Beth Hammack also opposed the decision. Both are expected to explain their votes before the end of the week.
- Warsh is changing how the Fed meets. The FOMC will still meet eight times in 2027, but one meeting will be a strategy session with no rate vote and no statement, and strategy meetings rise to two the following year, leaving just six scheduled chances to change rates outside emergency meetings.
- Strategists still see more tightening. Principal Asset Management’s Seema Shah said the Fed is still taking back some of last year’s cuts and expects a hike in December and another in early 2027, ING also expects a December increase following September’s hike, and DoubleLine’s Jeffrey Gundlach said his base case is “probably a hike in December.”
What Happened?
At his news conference, Fed Chair Kevin Warsh said progress is being made on inflation but price pressures remain too high, and he described artificial intelligence as just one of several factors driving an expansion he said was running strong. The press conference was again cut to about half an hour, with reporters limited to one question each. JPMorgan Wealth Management’s Phil Camporeale said “the Fed is leaning into patience.”
Why It Matters?
The decision was framed as a hawkish hold, and markets reacted that way: bitcoin slipped below $80,000 overnight as CoinDesk said a hawkish tone could keep real yields elevated. Fewer rate-setting meetings would also mean bigger stakes for each decision and potentially larger market moves around them. Cook’s dissent, combined with Hammack’s, signals a committee split on the next move as inflation stays above target.
What’s Next?
Watch for the written explanations from Cook and Hammack later this week, which will clarify which way each wanted to go. Thursday’s September PCE inflation data, with the Dow Jones consensus at 3.7% year over year, is the next test of the case for a December hike.
