Topic: Fed holds rates steady 10-2, two members favor a hike, Warsh says the number of rate-setting meetings will be reduced. On October 28 local time, the Federal Open Market Committee (FOMC) decided to maintain the federal funds rate target range at 3.75%-4.00%, but two members dissented and advocated continued rate hikes. Since the market still holds relatively high expectations for a December Fed rate hike, the outcome of this meeting may be interpreted more as a pause rather than a pivot: the key question is not whether the Fed will raise rates again, but when it will raise them, and the Fed's decision this time may indicate that the urgency for a rate hike has somewhat decreased. After the meeting result was released, the three major U.S. stock indexes closed higher, the yield on two-year U.S. Treasuries, which is sensitive to policy rates, fell, and the U.S. dollar index edged lower.
The official meeting statement remained brief and was slightly adjusted from the previous meeting: the assessment of the economy in the statement was upgraded from "moderate" to "strong," the labor market was described as "stable," and inflation was described as "still elevated." The statement firmly committed the Federal Open Market Committee to "bringing about price stability"; in addition, it added the wording that "the accumulation of more information will help the Committee judge the appropriate policy stance," which may provide a basis for this pause and for the scope of subsequent action.
Chair Warsh outlined changes in the way the Fed conducts meetings and monetary policy discussions during the post-meeting press conference. The Fed will continue to hold eight meetings each year, but starting in 2027, one of those meetings will focus on broad monetary policy strategy, with no rate vote and no policy statement, while the remaining seven will be rate decision meetings. In 2028, this arrangement will shift to two strategy meetings and six rate decision meetings. It is not yet clear what content the strategy meetings will release, but because there is no rate decision, market attention to them may decline. This marks a possible new era of "forward silence" for the Fed. Combined with the results of several special working groups previously established by Warsh, he may further adjust the Fed's external communication in the future, especially the Summary of Economic Projections and the dot plot. The market impact of this change is worth watching.
JPMorgan Asset Management believes that keeping rates unchanged at this meeting was in line with market expectations. The meeting outcome buys some time for the market and the Fed itself to assess upcoming employment and inflation data. However, continued tensions in the Middle East have kept oil prices high, and the market still leans toward pricing in further policy tightening. This means that unless there are clearer signals of cooling inflation or weakening economic data, U.S. Treasury yields may remain in a high range. Against this backdrop, healthy earnings performance in developed and emerging market equities certainly offers opportunities, but attention must be paid to the financing risks that higher interest rates pose to some technology companies; building a cross-style, cross-region equity portfolio and incorporating fixed income assets for diversified allocation is a relatively good strategy.
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