Key Highlights

● Warsh declined to respond to quotes from public officials.

● The Fed held rates steady in a 10-2 vote.

● The meeting was the Fed's last before the midterm elections.

● Warsh said politics played no role in the decision.

At his press conference, Federal Reserve Chair Kevin Warsh was asked about criticism of the central bank and declined to answer, saying he's not going to be responding to quotes from public officials. He did not explain why, so his reasons have to be inferred from the context, fitting with a Fed trying to show independence at a politically sensitive time, days before the midterm elections.

The Federal Open Market Committee held its target range unchanged in a 10-2 vote, with Governors Lisa Cook and Beth Hammack dissenting in favor of a 25-basis-point hike, marking Cook's first dissent since she joined the Fed Board in 2022.

Why Independence Matters to Markets

Staying out of the political argument helps the Fed's credibility, since markets watch whether a central bank sets rates based on data or pressure from politicians. Analysts said the Fed clearly feels it has time on its side and that it can move depending on the data.

Markets currently expect the Fed to keep tightening, with traders raising their odds of a December hike after the meeting. Some observers warned that showing independence is good, but sandbagging the markets and the public is not.

A Statement With a Firm Tone on Prices

Warsh said inflation is too high, linking it to energy costs, and also said monetary medicine is starting to work some. He described the debate behind the two dissents as a serious, sober discussion among officials.

Warsh also announced a change to the meeting schedule, with the Fed to hold seven rate-setting meetings plus one strategy-only session in 2027, the first change to the eight-meeting format in decades.