According to Xinhua Finance, in the early hours of October 29 Beijing time, the Federal Reserve announced it would keep the target range for the federal funds rate unchanged at 3.75% to 4%, in line with market expectations.
The decision was made by a 10-2 vote at this Fed policy meeting, with Fed Governor Lisa Cook and Cleveland Fed President Beth Hammack advocating for a further 25 basis point rate hike.
"The hawkish stance at the Fed's October meeting has not faded," said Bai Xue, senior deputy director of the Research and Development Department at Orient Jincheng, in an interview with Securities Daily. Two voting members calling for continued rate hikes shows that tolerance for inflation risk within the Fed has further declined. However, most members chose to observe the effects of policy after the September rate hike, and U.S. monetary policy has thus entered a phase of prudent observation and discretionary decision-making.
In its statement, the Fed said U.S. inflation remains elevated, and accumulating more information will help the Federal Open Market Committee determine appropriate monetary policy to ensure inflation falls back to its 2% target.
Wen Bin, chief economist at China Minsheng Bank, told Securities Daily that overall, recent U.S. inflation has shown signs of re-accelerating, the U.S. labor market remains stable, and while the economy retains resilience, the data present a mixed picture. Judging from the minutes of the Fed's September meeting, some Fed officials viewed rate hikes as a preventive measure against future inflation risks. Although short-term inflation is rising, the overall U.S. economic situation remains delicate, and given the significant uncertainty surrounding future external inflationary pressures and their transmission, the Fed chose to wait for more economic data signals, which also leaves flexible room for subsequent policy adjustments.
Fed Chairman Kevin Warsh said at a press conference that since the Fed's September rate hike, financial and credit conditions for some U.S. businesses and households have tightened, and market participants have become more cautious in capital allocation. But he said he "neither wants to nor can" describe the current financial environment as "restrictive."
Regarding the policy direction for the Fed's December meeting, Warsh provided no clear guidance and said, "Do not preset the outcome of the meeting."
"Looking ahead, with international oil prices running high and U.S. core inflation still sticky, the probability of a 25 basis point Fed rate hike in December has risen significantly," Bai Xue said. Considering the policy stance, inflation pressures and historical patterns, the Fed still has the possibility of continuing to raise rates in 2027.
A research report by Wellington Investment Management argued that the Fed still hopes for inflation to fall and wants to achieve its goal with minimal tightening. The baseline judgment is that the Fed will raise rates again in December, especially given current high oil prices and no signs yet of a slowdown in U.S. employment growth.
"The Fed still has room to raise rates, and high rates will be maintained for a relatively long period," Wen Bin said. The Fed will most likely raise rates this December. In addition, with the neutral rate rising, high rates are more likely to persist for an extended period, and the Fed will not quickly pivot to rate cuts before there are clear signs of inflation returning to 2%.
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