US Fed keeps rates unchanged after September hike
What's the story
The US Federal Reserve has decided to keep its benchmark interest rate unchanged, a move that came as little surprise given the persistent inflationary pressures. The decision was taken by the Federal Open Market Committee (FOMC) during their meeting on Wednesday. The overnight funds rate will remain in a range between 3.75%-4%, where it has been since September when a quarter percentage point increase was approved by the central bank.
Inflation concerns
Inflation still a concern for the Fed
In its post-meeting statement, the Fed acknowledged that "inflation remains elevated."
The committee said it would wait for the "accumulation of more information" to determine an appropriate policy stance. This is aimed at ensuring a timely return of inflation to its 2% target.
Despite two dissenting votes from Governor Lisa Cook and Cleveland Fed President Beth Hammack who favored a rate hike, the majority voted in favor of keeping rates steady.
Strategy shift
Tensions between Trump nominee and central bank persist
The upcoming midterm elections have been a factor in this decision, with some speculating that officials may avoid raising rates close to an election.
Fed Chairman Kevin Warsh, who was nominated by Trump, has been at odds with the central bank over the funds rate.
Despite these tensions, Warsh announced changes for next year's FOMC meetings that could cut down on the number of rate-setting meetings each year.
Market expectations
Futures market pricing indicates possibility of another rate hike
Despite the Fed's decision to keep rates steady, futures market pricing suggests a strong possibility of another hike at the next FOMC meeting in December.
Warsh said one meeting in 2027 will focus solely on broad monetary policy strategy without a vote on the federal funds rate or policy statement.
This comes as economists expect inflation to remain above 3% for September, even when excluding volatile food and energy prices.