Fed Holds Rates at 3.75%-4% as Two Officials Dissent for a Hike; Warsh Cuts 2027 Rate Decisions to Seven

The Federal Reserve kept the federal funds rate in a 3.75% to 4% range on Wednesday, where it has been since a quarter-point increase in September. The vote was 10-2: Governor Lisa Cook and Cleveland Fed President Beth Hammack both wanted a quarter-point hike, Cook's first dissent since she joined the Fed in 2022. Dallas Fed President Lorie Logan and Minneapolis Fed President Neel Kashkari, who dissented alongside Hammack when the committee last held in July, voted with the majority this time.

The statement said inflation "remains elevated" and that "the accumulation of more information" will guide the next move, while upgrading its description of economic activity to "expanding at a strong pace" from "solid" in September. The hold was widely expected: CME FedWatch had priced less than a 10% chance of a hike, and the S&P 500 held its gains after the release. Futures still point to a strong possibility of another hike at the December meeting and perhaps one or two more in 2027.

Chair Kevin Warsh also changed the calendar. The Fed will keep eight meetings in 2027, but one will focus only on monetary policy strategy, with no rate vote and no policy statement, so there will be seven rate decisions; in 2028 he expects two strategy meetings and six policy meetings.

UBS, writing before the decision, expects two more hikes by mid-2027 on top of September's, with cuts resuming in late 2027. The backdrop explains the hawkish lean: inflation has been above the 2% target for more than five years, the Fed's preferred gauge is expected above 3% for September, and the Atlanta Fed's GDPNow tracker points to 3.4% annualized growth in the third quarter. Next on the calendar are the September inflation data, the Nov. 3 midterm elections and the December meeting, where futures see a hike as a strong possibility.