Federal Reserve Holds Rates at 3.75% to 4% in a 10-2 Vote, With Cook and Hammack Dissenting for a Hike
The Fed did what markets expected at 1 p.m. Wednesday - nothing, for now - but two voters wanted a quarter-point hike, the statement upgraded the economy to 'strong,' and investors still expect the next move, in December, to be up.
The Federal Reserve held interest rates steady on Wednesday, maintaining its benchmark rate in the 3.75% to 4.00% range in a 10-2 vote while acknowledging that inflation 'remains elevated' and hinting that further hikes may come depending on the data, Reuters reported. The decision delays any change in borrowing costs until after next week's midterm elections. 'The accumulation of more information will help the Committee determine the policy stance appropriate to ensure a timely return of inflation to the Committee's 2% goal,' the Federal Open Market Committee said in its statement. 'The Committee will deliver price stability.'
The two dissents both pointed the same direction - up. Fed Governor Lisa Cook cast her first dissent on a policy decision, favoring a quarter-percentage-point rate hike; Cook is currently targeted by President Donald Trump for removal from the central bank. Cleveland Fed President Beth Hammack, a consistently hawkish voice who also dissented in July, favored the same increase. The statement itself marked a change from the September 15-16 meeting: the Fed upgraded its assessment of the economy to 'strong' from 'solid,' described investment as still robust, and said job gains are keeping pace with the workforce.
The numbers behind the caution have not cooled. Consumer prices rose 3.7% over the 12 months through September - a bigger annual increase than the month before - and producer prices jumped 6.3% over the same period, the New York Post reported, a sign costs could keep climbing through the holiday season. Energy costs remain high, including diesel, a key input for shipping and agriculture - costs Houston's port, trucking and energy economy feels first. Wednesday's hold follows the quarter-point increase approved last month, the Fed's first hike in more than three years; the central bank has now missed its 2% inflation target for five and a half years.
Markets took the hold calmly and kept their eyes on December. Stocks pared gains slightly after the decision, Treasury yields extended their rise with the 10-year note at 5.028%, and short-term rate futures rose a bit as traders pulled back slightly on hike bets, Reuters reported - but investors still expect further rate hikes will be needed, beginning in December and continuing into 2027, to bring inflation down. For Houston borrowers, the translation is simple: the wait for cheaper money is not over, and the Fed's own voters are split between waiting for more data and moving now.
