Fed officials kept interest rates unchanged and reaffirmed their commitment to controlling inflation, but did not explicitly signal a likelihood of raising rates at the next meeting in December.
However, Fed Chair Kevin Warsh stated during a subsequent press conference that officials had “clearly indicated we are ready to act as circumstances require, and we have made our willingness to act known.”
The Federal Open Market Committee (FOMC) voted 10-2 to maintain the federal funds rate within a range of 3.75% to 4%. Governors Lisa Cook and Cleveland Fed President Beth Hammack voted against the decision, preferring a 0.25 percentage point increase. Markets had anticipated more than three or four votes in favor of a hike in October, but only two were cast—interpreted by investors as a sign of a more dovish stance.
Although Warsh denied that the U.S. economy was beginning to overheat, he highlighted several factors indicating stronger-than-expected economic activity, including solid consumer spending and robust business investment.
“Reducing inflation is our responsibility,” Warsh said. “That’s why FOMC discussions over the past few days have focused primarily on price stability, which lies within our mandate.”
After the meeting, officials issued a statement saying they hoped data released in the coming weeks would help guide their next move.
Policy makers said Wednesday: “Accumulating additional information will help the committee determine the appropriate policy stance to ensure inflation returns to the 2% target set by the committee in a timely manner. The committee remains committed to achieving price stability.”
Following Warsh’s press conference, short-term U.S. Treasury yields declined while long-term bond yields rose, partly due to investor focus on his remarks about tightening financial conditions. As of now, the 10-year Treasury yield has returned below 5%.
While traders still expect a rate hike in December, they have reduced their bets on further increases by 2027. The futures market no longer fully prices in three hikes within this cycle.
