Fed holds at 3.75% to 4% as Cook, Hammack dissent for hike

The U.S. Federal Reserve held its benchmark interest rate at a range of 3.75 per cent to 4 per cent on Oct. 28, on a 10-2 vote, with two members preferring another quarter-point increase.

The decision follows the central bank’s quarter-point hike on Sept. 16, its first increase since July 2023 and the first under Chair Kevin Warsh. Fox Business reported that the meeting was the fourth led by Warsh and that the hold came a week before the U.S. midterm elections.

In its statement, the Federal Open Market Committee said Lisa D. Cook and Beth M. Hammack voted against the action. Both “preferred to raise the target range for the federal funds rate by 1/4 percentage point at this meeting.” The statement gave no further explanation of their votes.

The committee described an economy that is growing quickly. “Economic activity is expanding at a strong pace,” the statement said, adding that domestic spending has been resilient and that uncertainty remains elevated, in part because of geopolitical developments. On the labour market, it said “job gains have kept pace with the workforce, and the unemployment rate has changed little.”

On prices, the statement was blunt: “Inflation remains elevated.” The committee said more information would help it determine the policy stance needed for a timely return of inflation to its 2 per cent goal, and added that it “will deliver price stability.”

The U.S. Bureau of Labor Statistics reported on Oct. 14 that consumer prices rose 3.7 per cent in September from a year earlier, up from 3.4 per cent in August, as gasoline jumped 9.1 per cent in the month. That reading was the backdrop to the two dissents. We previewed the day’s decisions in our report on the Fed and Bank of Canada rate announcements.

For Canadians, the Fed’s pause comes on a day when the Bank of Canada moved the other way. The Bank of Canada announced on Oct. 28 that it raised its policy rate by a quarter of a percentage point to 2.5 per cent, according to its press release. Variable-rate mortgages and lines of credit in Canada follow the Bank of Canada’s rate, not the Fed’s, but U.S. policy still shapes borrowing costs and currency markets across North America. Our earlier explainer, Will the Fed hike Oct. 28? What it means for Canadians, sets out how the two central banks interact.

Warsh was scheduled to hold a news conference at 2:30 p.m. ET. The Fed’s next scheduled meeting is in early December.

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Via the Federal Reserve Board, Fox Business and the U.S. Bureau of Labor Statistics.