Fed Holds Rates Steady Despite Lack of Progress on Inflation — SkimNews
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- Federal Reserve kept the federal funds target at 3.75%-4% in a 10-2 vote; its statement called inflation “elevated” and said more work was needed to reach 2%, while Chair Kevin Warsh likewise said inflation was too high.
- Lisa Cook cast her first monetary-policy dissent, joining Beth Hammack in favoring a quarter-point increase; Hammack had dissented repeatedly earlier in the year.
- Kevin Warsh said the Fed would still meet eight times in 2027, but one meeting would address strategy without an interest-rate vote; in 2028, six meetings would set rates and two would focus on strategy.
- Kevin Warsh called the economy strong but not too hot, citing stronger productivity and tighter credit conditions; growth remained solid on an AI investment boom even as wage gains failed to keep up with prices.
- Treasury yields diverged after the decision: the two-year fell to 4.71% while the 10-year rose to 5.04%, with the latter move driven by a higher breakeven inflation rate; MUFG Securities strategist George Goncalves said the market was saying the Fed was “talking tough on inflation” but not delivering on it.
- S&P 500 finished 0.3% higher after a volatile stretch while Warsh spoke, as market expectations for rate increases fell.
- Trump demanded lower Fed rates and moved to remove Cook over unproven mortgage-fraud allegations, with the White House summoning her to a hearing; Warsh said politics played no role and that the Fed would not participate “to my knowledge.”
Why it matters: Cutting rate-setting votes to seven in 2027 and six in 2028 gives policymakers more time for strategy but leaves investors fewer scheduled policy updates. Some economists argue the longer intervals improve deliberation; others say they make inflation and labor-market changes harder to address quickly.
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