Fed Holds Rates Steady Despite Inflation Being Too High

The Federal Reserve voted 10–2 to keep the federal funds target range unchanged at 3.75%–4%, despite acknowledging that inflation is still too high. Markets had priced only about 2 basis points of a potential 25bp increase, and just 6 of 97 surveyed organizations expected a hike, limiting market reaction. Senior officials signaled they were prepared to move cautiously and avoid back-to-back rate hikes after September’s decision, though Beth Hammack and Lisa Cook favored additional action; Cook’s dissent was described as surprising. At the press conference, Chair Kevin Warsh said inflation remains elevated but that the Fed’s “medicine” is starting to work, with December still the most likely path for a hike.