The Federal Reserve left borrowing costs unchanged while it waits for more data on inflation. Two policymakers dissented in favor of a rate hike, and markets still price further increases.
The Federal Reserve held interest rates steady on Wednesday, as expected, delaying any change until after next week's US midterm elections. The central bank said inflation remains elevated.
The 10-2 decision kept the benchmark rate within the 3.75%-4.00% range. The Fed also upgraded its view of the economy, which it now says is growing at a strong pace.
Two dissents favor a hike
Fed Governor Lisa Cook, whom President Donald Trump is currently targeting for removal, cast her first dissent on a policy decision. She favored a quarter-percentage-point increase. Cleveland Fed President Beth Hammack, described as a consistently hawkish voice, also dissented in favor of a rise.
The policy statement hinted that more hikes may be needed, according to Reuters. Between now and the December meeting, the Federal Open Market Committee said, more information will help it set the appropriate policy stance.
Warsh rejects an overheated economy
Fed Chairman Kevin Warsh said he expects inflation can fall to the 2% target without having to slow growth or raise unemployment. He does not think the economy is running too hot. Warsh argued that productivity changes may let the US grow faster without as much inflation.
At the press conference, Warsh said: "The economy is pointing in the right direction." He also said politics played no role in the decision to leave rates unchanged.
Markets still price a December hike
Market reaction was muted: US stocks pared gains slightly after the decision but ended higher on the day, and longer-dated US Treasury yields extended their rise.
Financial markets are still pricing in a couple of additional hikes in the coming months, though with slightly less conviction than before Warsh spoke. Pricing shows about an 80% chance of a hike at the December 8-9 meeting.
Source: Investing.com (Reuters)
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