US Federal Reserve holds rates at 3.75–4% after divided vote

The US Federal Reserve announced in Washington DC on Wednesday, October 28, that its benchmark interest rate would remain within the 3.75–4 per cent range. According to reports, policymakers voted 10-2 for the pause as inflation stayed high and economic activity continued to expand.

The decision follows September's increase of 25 basis points, which brought the rate to its current level. Governors Lisa Cook and Beth Hammack opposed holding steady and instead supported another increase of the same size.

Fed Chair Kevin Warsh described an economy with sustained consumer spending, substantial business investment and strong productivity growth. Employment gains were broadly matching workforce growth, while unemployment had shown little movement.

Inflation keeps further increases in consideration

The US Federal Reserve continues to face inflation above its 2 per cent objective. Warsh said officials needed additional evidence before settling on the policy approach required to bring price growth back towards that goal.

He cautioned against basing the inflation response on a particular deadline or an isolated piece of data. Although inflation expectations had improved since September's policy move, he did not consider overall financial conditions tight.

Some households and businesses were nevertheless experiencing tighter credit and financial conditions, Warsh said. Further rate increases remain possible if inflation does not moderate, but the central bank has made no commitment to a particular next step.

Some economists and market participants see December as a possible occasion for another increase. That prospect remains an expectation rather than an announced policy decision.

Market moves following the announcement were mixed across US stock indexes. Treasury yields increased slightly, and short-term interest rate futures also advanced as uncertainty persisted over the direction of monetary policy.

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