A hold, and two votes for a hike
On Wednesday, the Federal Open Market Committee opted to hold its benchmark rate within a 3.75%–4% range, a move the markets had widely expected. The tally was 10-2, with Fed Governor Lisa Cook and Cleveland Fed President Beth Hammack both favoring a quarter-point hike. For Cook, who was appointed to the central bank by President Joe Biden in 2022, this marked the first time she has dissented since taking her seat.[S1][S2][S4]
Hammack's objection had been widely trailed; Cook's had not. Before the meeting, previews had pointed to Hammack, Dallas Fed President Lorie Logan and Minneapolis Fed President Neel Kashkari as the most likely dissenters. Logan and Kashkari, who both voted against the July hold and have argued for higher rates, joined the majority this time.[S1][S2]
The post-meeting statement described inflation as still elevated and said gathering more information would help the committee settle on a stance that returns inflation to its 2% goal in timely fashion. It also upgraded its read on activity to expanding at a strong pace, from solid in September, and dropped a sentence explaining the prior month's increase.[S1][S2][S4]
Warsh rejects political motive
The decision landed six days before nationwide midterm voting on Nov. 3, with control of Congress at stake. The White House had cautioned the central bank against raising rates before the election. At a news conference, Chair Kevin Warsh said politics had no bearing on the outcome and that during two days with colleagues he heard no discussion of politics or the coming vote.[S1][S2][S3][S4]
Warsh, nominated to the chair by President Donald Trump, has declined to signal the committee's next move, saying he does not prejudge meetings. Trump has repeatedly pressed for lower rates and criticized the September increase, directing most of his complaint at the rate-setting committee rather than at Warsh.[S1][S2][S4]
The meeting also unfolded amid Trump's renewed effort to remove Cook over allegations about information on her home loan applications, after the Supreme Court halted an earlier attempt. The White House has asked Cook to testify at a private hearing next week; Warsh said he understood neither he nor the Fed would take part.[S1][S3]
Inflation, growth and the December question
Consumer prices rose 3.7% year over year in September, lifted by gasoline, while core inflation excluding food and energy came in at 2.6% and exceeded forecasts. The Iran war has pushed energy costs higher. The Fed's preferred gauge is expected to show inflation above 3% for September even without food and energy, and RSM forecasts a 3.6% annual rise when that data appears Thursday.[S2][S3][S4][S5]
Growth has stayed firm: the Atlanta Fed's GDPNow tracker points to 3.4% annualized output in the third quarter, the strongest in a year, with solid consumer spending and artificial intelligence investment supporting activity. Unemployment remains low. That mix has intensified debate over how much restraint the current rate actually imposes.[S1]
Futures pricing points to a likely increase at the December meeting and possibly one or two more in 2027. RSM reads the dissents as evidence that a majority of the committee is prepared to move in December and again in March, and warns the Fed may need to catch up, including through a half-point move.[S1][S5]
A smaller policy calendar from 2027
Warsh used the news conference to outline changes to the committee's calendar. He said eight meetings a year remains the right number, but that in 2027 one gathering will be devoted solely to broad monetary strategy, without a rate vote or policy statement, and that 2028 should bring two strategy sessions and six policy-setting meetings.[S1][S3][S4]
He described the change as a way to reserve time and space for strategic deliberation by an intellectually diverse group. Separately, he said the task forces he created may not finish by year's end as promised, and that he would attend a hearing next month held by the Fed task force examining artificial intelligence.[S3]
Warsh suggested higher rates are already cooling the AI buildout as investors push back on technology borrowers, and said he hoped the task force hearing would clarify what the boom means for the Fed's dual mandate. Cook said in a recent speech that AI-driven inflation appears largely confined to the tech industry.[S3]
