Fed Policymakers Hold Steady on Interest Rates

With the pivotal midterm elections looming in less than a week, Federal Open Market Committee members voted as expected Wednesday to hold steady on its benchmark interest rates.

The Fed announced it was maintaining its target range of 3.75% to 4%. The market widely anticipated the decision, but unlike the September meeting, the vote wasn’t unanimous.

Two members of the FOMC dissented. Governor Lisa Cook and Cleveland Fed President Beth Hammack both favored raising rates by a quarter percentage point.

Fed Chairman Kevin Warsh also announced that the central bank will reduce he number of rate-setting meetings beginning in 2027, noting that while eight meetings per year is “the right number” for the FOMC, one of them will focus exclusively on broad monetary policy strategy starting in 2027.

Warsh said the rest will be policy-setting meetings.

In 2028, the Fed will plan to host two meetings focused on strategy discussions and the remaining six will be centered on policy setting, Warsh said.

Need More Data

In its post-meeting statement, the Fed said it will need more data to guide its next steps on policy.

“Inflation remains elevated,” central bank policymakers said in the statement.

“The accumulation of more information will help the Committee determine the policy stance appropriate to ensure a timely return of inflation to the Committee’s 2 percent goal. The Committee will deliver price stability.”

Fed policymakers are faced with persistent inflation and effects of the Iran war on the economy.

The latest figures show that the Consumer Price Index rose 3.7% year over year in September, while the Fed’s preferred inflation measure, the Personal Consumption Expenditures (PCE) price index, rose 3.4% in August.

Above the 2% Target

Both are above the Fed’s 2% target.

Last month, 12 of 18 FOMC officials forecast one more rate hike this year in addition to September’s quarter-point increase.

Ted Rossman, a finance analyst at Money Management International, said a quarter-point increase in early December “seems very likely,” The Hill reported.

“Inflation remains uncomfortably high, and the rising cost of living and elevated interest rates are combining to squeeze household budgets,” Rossman told The Hill via email.

Bankrate housing market Analyst Jeff Ostrowski said recent mortgage rate gyrations since the last Fed policy meeting underscore the fact that the central bank doesn’t control mortgage rates.

“The Fed raised its benchmark rate a quarter-point, and mortgage rates jumped three-quarters of a point in a month. The lesson? Mortgage rates move with 10-year Treasury yields, not the federal funds rate,” he says.