The Federal Reserve kept its policy rate at 3.75%-4.00% on Wednesday, but two officials voted for a hike. Inflation accelerated in September, and policy watchers expect the Fed to resume hiking in December.
Fed officials held interest rates steady on Wednesday, with the Federal Open Market Committee keeping the federal funds rate at 3.75%-4.00%. The vote was 10-2, and Governor Lisa Cook and Cleveland Fed President Beth Hammack preferred a quarter-point hike instead.
This pause follows a 25 basis point increase in September, the first monetary policy tightening since July 2023. It also came in the last Fed meeting before the midterm elections.
Inflation runs hotter than the Fed's target
The Fed held despite hotter-than-expected readings. Headline CPI climbed 3.7% Y/Y in September, up from 3.4% in August, while core CPI gained 2.6%, up from 2.4%.
In its statement, the FOMC said inflation remains elevated and that the Committee will deliver price stability. In September, Fed Chair Kevin Warsh said, according to Investing.com: "the plain fact is that inflation is too high and has been for too long."
Meanwhile, the Middle East conflict continues to act as a volatile supply shock for global energy prices. A jump in gasoline prices contributed to over half of the monthly rise in headline CPI in September.
Markets look to December
Markets had priced out a hike for this meeting and fully priced one in for the Fed's early December meeting, according to CoinDesk. After the decision, the 10-year Treasury yield rose four basis points to 5.025%, and Bitcoin climbed to $81,000.
Policy watchers expect the Fed to restart hiking in December. The minutes of the September meeting showed that most policymakers saw another rate hike by the end of this year.
Warsh has rejected providing forward guidance, so his press conference at 14:30 ET will be watched for any signal on future rate moves.
Sources: Investing.com, The Guardian, CoinDesk
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