Fed holds rates steady despite dissents
The Federal Reserve voted to leave interest rates unchanged today as officials seek more information to decide whether additional hikes would be necessary to tame inflation. Two officials broke from their colleagues, both arguing that the central bank should raise rates by a quarter of a percentage point: Cleveland Fed President Beth Hammack plus Fed Gov. Lisa Cook, who had not previously dissented in a Fed vote. Chair Kevin Warsh reprised his typically hawkish tone after the announcement, telling reporters that “if you think that we’re tolerating some inflation target somewhere [above 2%], let us disabuse you of it.” He also revealed that the Fed will take one less vote a year beginning in 2027, so officials can “reserve time and space, as an intellectually diverse group, for strategic deliberations.” The dissents reinforce investor expectations that the Fed will hike rates in December. The Iran war has continued to drive up energy costs, even as other economic indicators paint a more positive picture. The Trump administration had warned the central bank against hiking rates before next week’s midterm elections. Warsh told reporters Wednesday that “politics played no role in the d
The Federal Reserve voted to leave interest rates unchanged today as officials seek more information to decide whether additional hikes would be necessary to tame inflation. Two officials broke from their colleagues, both arguing that the central bank should raise rates by a quarter of a percentage point: Cleveland Fed President Beth Hammack plus Fed Gov. Lisa Cook, who had not previously dissented in a Fed vote.
Chair Kevin Warsh reprised his typically hawkish tone after the announcement, telling reporters that “if you think that we’re tolerating some inflation target somewhere [above 2%], let us disabuse you of it.” He also revealed that the Fed will take one less vote a year beginning in 2027, so officials can “reserve time and space, as an intellectually diverse group, for strategic deliberations.” The dissents reinforce investor expectations that the Fed will hike rates in December. The Iran war has continued to drive up energy costs, even as other economic indicators paint a more positive picture.
The Trump administration had warned the central bank against hiking rates before next week’s midterm elections. Warsh told reporters Wednesday that “politics played no role in the decision” to hold rates steady. “I just spent two days with my colleagues upstairs; I didn’t hear an utterance about politics,” Warsh said. Trump recently resurrected his attempt to fire Cook, reviving his allegations she committed mortgage fraud as he continues to lobby for lower rates.
The White House has asked Cook to testify on the mortgage fraud allegations at an unusual private hearing next week. Warsh said, to his knowledge, neither he nor the Fed would be involved in those proceedings. In response to a question from Semafor, Warsh said the task forces he created may not wrap up their work by the end of the year as promised — and that he would attend a hearing next month by the Fed task force focused on AI. In a speech last month, Cook highlighted how the AI buildout is fueling inflation but indicated it was mostly contained to the tech industry.
At Wednesday’s press conference, Warsh indicated higher interest rates are having a cooling effect on the AI boom as investors push back on tech borrowers. “What are the implications for the dual mandate?” Warsh said he hoped the AI task force hearing would answer. “Is this going to make it harder or easier for us to achieve price stability over the next several years?”