Key Highlights

● The Fed paused after its September rate hike, its first since 2023.

● Two officials dissented in favor of another hike.

● The statement's language leaned hawkish.

● Fed Chair Warsh stressed readiness to act further.

The Federal Reserve hit pause, six weeks after its first rate hike since 2023, with the central bank leaving the benchmark rate range unchanged in a 10-2 vote. The decision was widely expected, but the details made clear the Fed is not done thinking about tightening.

Governor Lisa Cook and Cleveland Fed President Beth Hammack dissented in favor of a hike, marking Cook's first dissent since joining the Fed, and market odds of a December rate increase rose after the meeting.

A Hawkish Hold

The Fed's statement left little doubt about its concerns, saying economic activity is expanding at a strong pace and inflation remains elevated. Compared with September, the statement upgraded its description of growth and dropped language saying policy supports a return to the inflation goal.

One strategist had previewed exactly this outcome, expecting a hawkish hold in October with the Fed delivering one more hike at year-end.

Why Wait?

Fed Chair Kevin Warsh, in his fourth meeting as chair, explained the Fed's approach in terms of gathering information, saying getting policy right involves assessing near-term developments at timely, regular and information-rich intervals. He also cautioned against reacting to any single data point.

Warsh said the Fed has made clear its willingness and readiness to act, and he also announced a change to how the Fed operates, with one of the Fed's eight meetings each year to become a strategy-only session with no rate vote starting in 2027.