- The US Federal Reserve held interest rates steady at 3.75-4% after September hike
- The FOMC voted 10-2 to maintain rates to support the Fed's dual mandate
- Inflation remains elevated while job gains match workforce growth, said the Fed
The US Federal Reserve held the benchmark interest rate steady in the range of 3.75-4% after delivering its first rate hike in three years during the previous September monetary policy meeting. Chairman Kevin Warsh-led Federal Open Market Committee (FOMC) voted 10-2 to hit pause on the federal funds range in support of the US central bank's 'dual mandate'. In its statement, FOMC said inflation remains elevated, while job gains have kept pace with workforce.
It also addded that the US economic activity is expanding at a "strong" pace. The monetary policy's vote in its fourth meeting under the chairmanship of Kevin Warsh was not unanimous as Fed Governor Lisa Cook and Cleveland Fed President Beth Hammack dissented in favor of a 25-basis-point rate hike.
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US Fed said in its policy statement, ''FOMC approved the following statement for release by a 10 - 2 vote: The Committee decided to maintain the target range for the federal funds rate at 3-3/4 to 4%, in support of Fed's dual mandate. The Committee is continuing its policy of maintaining ample reserves in the banking system.''
''Economic activity is expanding at a strong pace. While uncertainty remains elevated owing, in part, to geopolitical developments, domestic spending has been resilient. Productivity growth is strong, and capital investment is robust. Job gains have kept pace with the workforce, and the unemployment rate has changed little,'' it added.
The central bank's statement highlighted that inflation remains elevated. ''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% goal. The Committee will deliver price stability,'' said the central bank.
''Voting against the monetary policy action were Lisa D. Cook and Beth M. Hammack, who preferred to raise the target range for the federal funds rate by 1/4 percentage point at this meeting,'' it concluded. Wall Street traders have shifted their focus to the December meeting, where fed funds futures trading implies a roughly 85% likelihood of a rate hike, according to the CME FedWatch tool.
Kevin Warsh's assessment
The Fed's latest policy statement is a notable change from the September 15-16 meeting, with a hint of the sort of forward guidance Warsh usually avoids. The assessment of the economy was upgraded to 'strong' from the 'solid' expansion seen as of the September meeting, while investment was still viewed as robust and job gains were keeping pace with the workforce.
During the post-policy press conference, Warsh said the FOMC believes it needs more information to determine the appropriate policy stance and ensure inflation returns to its 2% goal.
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"My colleagues and I assess the economy by looking out the window. It's what we call 'interrogating reality' to gauge what's really going on. It is not a task that has grown easier," he said.
Warsh also said the labor market remains in relatively strong shape, but inflation continues to run above the Fed's 2% target.
“On the employment side of the Fed's dual mandate, conditions are quite positive. And yet Americans, of course, are still dealing with inflation that has been running above the committee's objective for close to six years. It's our responsibility to get inflation down,” he said.
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