| Consensus | Consensus Range | Actual | Previous | |
| Change | 0bp | 0bp to 25bp | 0bp | 25bp |
| Federal Funds Rate - Target Range | 3.75 to 4.00% | 3.75 to 4.00% to 4.00 to 4.25% | 3.75 to 4.00% | 3.75 to 4.00% |
Highlights
As widely expected, the FOMC left the fed funds target rate range unchanged at 3.75 to 4.00 percent despite the fact that"inflation remains elevated" and the repeated commitment to"deliver price stability".
The vote was 10-2 in favor of maintaining the fed funds target rate range.
Lisa Cook and Beth Hammack favored a 25 basis point rate hike.
"The Committee is continuing its policy of maintaining ample reserves in the banking system," the statementt repeated.
During a press conference following the announcement, Chair Kevin Warsh said politics played no role in today's decision, less than a week before the November 3 midterm elections.
Going forward,"The accumulation of more information will help the Committee determine the policy stance appropriate to ensure a timely return of inflation to the Committee's 2 percent goal," the statement said. What"timely" means is unclear, although another batch of high inflation numbers could contribute to the accumulation of information adding urgency and potentially lead to a December rate hike. The press conference did not bring much clarity to the timing issue even as Warsh stressed"Inflation is too high". Asked why not raise rates today, he said it is not about some fixed individual date on the calendar. In September, the Fed had said that the decision then to hike rates by 25 basis points would"support a timelier return" to target.
Turning to financial conditions, Warsh said that the September rate hike has had an effect, as market particants are discriminating more and credit spreads have widened. What has been done has started to"work some", he said, adding that financial conditions have tightened, although he is"unwilling and unable” to consider them as"tight".
Today's statement provided little change to the growth assessment. It said the U.S. economy is growing at a"strong" pace versus"solid" in September, while reiterating that"uncertainty remains elevated" and domestic demand is resilient.
Productivity is still seen as"strong" and capital investment as"robust", repeating September's language. It will be interesting to see how AI investment reacts should financial conditions tighten further given the importance of AI investment in the current GDP strength. Both weaker AI investment and AI-related productivity gains could lower the urgency for further rate hikes.
There was no change to the assessment of the labor market, with job gains having"kept pace with the workforce" and"little" change in the unemployment rate.
On another topic, Warsh announced a change to the FOMC schedule starting next year. While there will still be eight meetings a year, one will be focused on broad monetary policy strategy with no policy vote. In 2028, two of the eight meetings will be dedicated to setting strategy and six to setting policy.
Market Consensus Before Announcement
The consensus looks for no action. Weak September jobs data and the proximity of the midterm elections argue for the Fed to wait until December to move.
Definition
The FOMC meeting announcement is a policy statement issued at the conclusion of each meeting of the Federal Open Market Committee. It offers updates on economic conditions with special focus on the health of the labor market and the latest on inflation. It also updates the status of the federal funds target which is the FOMC's official policy interest rate. This rate is expressed within a range, such as 1.75 to 2.00 percent. The center of this range is the implied target. The higher this target, the more restrictive monetary policy becomes, the lower this target, the more accommodative policy becomes. Other policy tools are also discussed in the meeting announcement including updates on direct purchases of Treasuries and mortgage-backed securities. Debate is not offered in the statement, just the consensus view is expressed, though the statement does list the total committee vote and how each member voted.