The Federal Reserve left rates unchanged as markets anticipated, but the decision laid bare internal divisions: this rate decision did not win the unanimous support of the voting monetary policy committee members.
On Wednesday, October 28, Eastern Time, the Fed announced that its monetary policy committee, the FOMC, decided to keep the target range for the federal funds rate unchanged at 3.75% to 4.00%. This means the central bank paused after deciding in September to raise rates for the first time in three years. But that does not mean there will be no more hikes this year.
The updated dot plot released at the last meeting in September showed that most Fed policymakers expect one more rate increase before the end of the year. Moreover, the statement for this decision showed that two voting members supported a hike at this meeting, once again defying US President Trump, who has repeatedly urged the Fed to cut rates this year. Coincidentally, the dissenters included Fed Governor Cook, whom Trump has recently pushed to remove from office.
This rate decision was entirely within Wall Street's expectations. As of Tuesday's close, CME tools showed that the federal funds rate futures market priced in nearly a 91% probability that the Fed would hold rates steady this week, while the probability of at least a 25 basis point hike at the next meeting, in December, exceeded 82%.
Nick Timiraos, a reporter known as the "new Fed wire," wrote that Fed officials had previously signaled a possible rate hike in December. The decision to keep rates unchanged this time was intended to buy time to assess whether further hikes are needed, thereby preventing energy costs and the AI construction boom from generating broader inflationary effects.
Fed's hawkish dissent eases compared with July, Cook gives Trump the middle finger
Compared with the statement from the previous meeting released in mid-September, the biggest difference in this post-meeting statement lies in the rate decision. Last time, all 12 voting FOMC members supported a 25 basis point hike. This time, the FOMC decided to keep rates unchanged, but two of the 12 voters opposed the decision, while the remaining ten supported it.
Judging by the vote, this was the second FOMC meeting since Warsh became Fed Chair in which a decision did not receive the unanimous consent of voting members. The last such case occurred at the meeting in late July, when three regional Fed presidents opposed holding rates steady and all supported a 25 basis point hike. That was the first time since 2016 that three voters cast dissenting votes in the same direction on a policy adjustment.
The number of dissenters at this meeting was lower than last time. The statement showed that the opposing votes came from Fed Governor Cook and Cleveland Fed President Beth Hammack.
It is worth noting that Hammack also dissented in July because she supported a rate hike. However, the other two dissenters in July, Minneapolis Fed President Neel Kashkari and Dallas Fed President Lorie K. Logan, both returned to the mainstream camp favoring a pause this time. From this perspective, the Fed's internal hawkish dissent has eased somewhat compared with July.
Some commentary said Cook's opposing vote was simply giving the middle finger to US President Trump, who has consistently pushed for rate cuts.
As previously mentioned in an article, in June this year the US Supreme Court ruled that Trump could not remove Cook without giving her a full opportunity to defend herself, but it did not ultimately determine whether the allegations were valid. This month, Trump again moved to remove Cook from her position as governor.
On October 9, the White House announced the creation of a special investigative committee to look into allegations that Cook made false statements in mortgage-related documents, and scheduled a related hearing at the White House on November 5. In a memorandum at the time, Trump said that as president he has a duty to ensure the law is faithfully executed, and said the committee would review the evidence and allegations against Cook to determine whether grounds for removal exist.
Steady economic expansion changed to strong expansion; accumulating more information helps ensure inflation reaches target in a timely manner
In commenting on the economy, this meeting's statement largely followed the wording of the previous statement, with only one difference. Last time it said the US economy was expanding steadily; this time "steady" was changed to "strong."
The statement continued to emphasize that the Fed is committed to achieving price stability, and reiterated that job growth has kept pace with growth in the labor force, that the unemployment rate has remained basically unchanged, and it repeated last time's language that "productivity growth is strong and capital investment momentum is solid."
As in the previous statement, this statement wrote on the uncertainty facing the economy: "Although uncertainty remains elevated, partly reflecting geopolitical developments, domestic spending has shown resilience."
The statement also reiterated that the Fed will continue its policy of maintaining ample reserves in the banking system.
The statement once again repeated that "inflation remains somewhat elevated." Immediately after that sentence, the statement adjusted its language on rate actions. Last time it said a hike "would help bring inflation back down to the Committee's 2 percent objective in a timely manner." This statement removed that sentence and added a new one:
"The accumulation of more information will help the Committee determine the appropriate policy stance to ensure inflation returns to the Committee's 2 percent objective in a timely manner."
The following red text shows the deletions and additions in this decision statement compared with the previous one.
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