Fed Holds Rates Steady as Three Officials Push for Hike — SkimNews
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- The Federal Reserve held its federal funds rate target at 3.5%-3.75%, where it has stood since December, opting against the rate hike that Wall Street had speculated about.
- Beth Hammack, Neel Kashkari, and Lorie Logan — the Cleveland, Minneapolis, and Dallas Fed presidents — voted for a quarter-point hike, while nine other FOMC members, including Chair Kevin Warsh, voted to stand pat.
- Warsh reaffirmed the Fed's 2% inflation target, saying there is 'no soft implicit target' and that five-plus years of above-target inflation 'cannot be cured in nine weeks.'
- Markets had priced a rate hike at roughly 1 in 3 before the meeting — the most uncertainty around a Fed decision in years — with most watchers anticipating the hold.
- Warsh attributed recent sharp rises in bond-market borrowing costs partly to the Fed's deliberate pullback from forward guidance, saying 'markets have made decisions because we stepped back, in part, from trying to influence those markets.'
- The post-meeting statement was virtually unchanged from June, repeating language about economic activity expanding 'despite elevated uncertainty that owes, in part, to the conflict in the Middle East.'
- Warsh committed to holding press conferences at least through the end of the year, reversing uncertainty expressed during his confirmation hearing about whether one was needed after every meeting.
Why it matters: Three regional Fed presidents publicly dissenting for a hike is the kind of open split that can move rate expectations at the next FOMC meeting — especially since markets priced the hike odds at just 1 in 3 beforehand. With Warsh embracing reduced forward guidance, borrowers and investors lose the usual Fed signals that anchor expectations, contributing to the recent jump in bond yields.
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