Fed Holds Rates at 3.75%-4% as Cook, Hammack Dissent in Favor of Hike
The Federal Reserve left its benchmark interest rate unchanged Wednesday at a range of 3.75% to 4%, but two policymakers broke ranks to push for another quarter-point hike.
The Federal Open Market Committee voted 10-2 to hold, the Fed said in its policy statement. Governor Lisa Cook and Cleveland Fed President Beth Hammack dissented, preferring to raise the target range by a quarter point.
The statement upgraded the central bank’s view of growth, saying economic activity is “expanding at a strong pace.” It also warned that “inflation remains elevated,” keeping the focus squarely on prices.
The rate has sat at its current level since a quarter-point increase in September, CNBC reported. Traders had seen less than a 10% chance of a hike at this meeting.
Inflation has now run above the Fed’s 2% target for more than five years.
The vote marked Cook’s first dissent since she joined the board in 2022 as an appointee of former President Joe Biden. President Donald Trump is trying to remove her over allegations tied to home-loan applications.
The Supreme Court halted the first attempt, and the administration restarted the process, with a hearing set for early November.
Dallas Fed President Lorie Logan and Minneapolis Fed President Neel Kashkari, who dissented alongside Hammack in July, joined the majority this time.
“That’s a credibility move,” KPMG chief economist Diane Swonk said of Cook’s vote on television, adding that Cook was signaling that she is “not getting spooked by the election” and is worried “we should be raising rates right now.”
Warsh Rejects Election Questions
Chairman Kevin Warsh rejected suggestions that the Nov. 3 midterms shaped the decision. “Politics played no role in the decision,” he told reporters. “I just spent two days with my colleagues upstairs. I didn’t hear an utterance about politics.”
Warsh called the meeting “a heck of a family fight” and said data over the coming weeks would leave policymakers “better positioned” to decide in December whether to raise rates.
Asked about Trump’s criticism, Warsh said, “I’m not going to be responding to quotes from public officials,” Yahoo Finance reported. Futures traders afterward priced in a better than 80% chance of a quarter-point hike at the next meeting.
In his opening remarks, Warsh said first-half growth was revised up to 2.4% from 1.8%, and that the third quarter likely topped 3%, with business investment rising at about a double-digit pace.
“Energy and related prices have moved higher again in recent weeks,” Warsh said, adding that the Fed’s job is to keep those price changes from broadening across the economy.
Warsh also announced a schedule change. “We believe eight meetings per year is the right number for the FOMC,” he said.
But one 2027 meeting will focus only on strategy, with no rate vote, and two will do so in 2028, Warsh said.
“The Fed is taking a wait-and-see approach, and I think that makes sense given where we are in the cycle,” Bryn Mawr Trust’s Andrew Davis told CNBC. “The economy is slowing, but slowing and breaking are two different things.”
The next major test arrives Thursday, when the Commerce Department releases September figures for the Fed’s preferred inflation gauge, which economists expect to come in above 3%.
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