Fed Holds Rates at 3.75%-4% as Growth Beats Forecasts — SkimNews
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- Federal Reserve held its federal funds target range at 3.75%-4%, pausing after raising interest rates for the first time in three years at September's meeting and saying it wanted more information before changing policy again.
- US economy grew 3.4% on an annualised basis in the three months to September, stronger than analysts expected, with annualised personal spending up 3.8% and private investment surging 19.4%, largely on artificial intelligence spending.
- Inflation ran at 3.7% in the year to September, above the Fed's 2% target, with fuel and energy prices that had surged off the back of the war in Iran driving prices higher.
- Lisa Cook and Cleveland Fed President Beth Hammack dissented, voting to raise rates to 4%-4.25% from 3.75%-4%, while 10 of the 12 committee members voted to hold.
- Kevin Warsh said September's "monetary medicine" was starting to work, pointed to tightening credit conditions, and declined to commit to a path "in six weeks' time" ahead of the 8-9 December meeting, after the committee had signalled there could be one more rate rise this year.
- Borrowers get no rate relief but also no further increase: leaving rates unchanged means new mortgage, credit-card, car-loan and business-loan rates are less likely to change, while interest rates on cash savings are also unlikely to rise.
Why it matters: Two of 12 committee members — Lisa Cook and Beth Hammack — voted to raise rates to 4%-4.25%, showing the internal pull toward tightening that the 10-vote hold masks. For households, the pause leaves new mortgage, credit-card and car-loan rates unlikely to change, but savings rates are also unlikely to rise.
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