US Federal Reserve leaves interest rates unchanged

Federal Reserve officials left interest rates unchanged and reiterated their commitment to containing inflation, but did not offer a clear signal that they might raise rates at their next meeting in December.

“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,” policymakers said Wednesday in a post-meeting statement.

“The committee will deliver price stability.”

The Federal Open Market Committee voted 10-2 to hold its benchmark federal funds rate in a range of 3.75% to 4%.

Governor Lisa Cook and Cleveland Fed President Beth Hammack dissented, preferring to raise rates by a quarter percentage point.

The decision to hold rates comes less than a week before the November midterm elections.

Amid widespread discontent over the economy, Democrats are favoured to win a majority in the House of Representatives and have a polling edge in several key races for the Senate.

The S&P 500 and Treasury yields remained higher following the decision. Fed Chairman Kevin Warsh is scheduled to hold a press conference at 2:30 p.m. in Washington.

Warsh is likely to be pressed to explain the Fed’s decision not to raise rates despite persistent price pressures and signs of a strong economy.

The consumer price index rose in September at its fastest pace in five months.

That was driven largely by higher energy prices linked to the war in Iran, but the report also showed broad-based inflation across goods and services.

Policymakers will get fresh data Thursday when the Bureau of Economic Analysis releases the September reading for the Fed’s preferred inflation gauge, the personal consumption expenditures price index.

Strong consumer spending and a crush of investment into artificial intelligence also continue to boost growth.

Economists expect figures also due out Thursday will show the US economy grew at a robust annualised pace of about 3.2% in the third quarter.

The post-meeting statement repeated its prior descriptions of economic activity as expanding “at a strong pace” and domestic spending as “resilient.”

It also reiterated that the unemployment a rate had changed little and inflation remained elevated.

Rollercoaster rate expectations

Investors’ expectations for this meeting changed drastically over recent weeks. Soon after the Fed’s decision to hike interest rates in September.

Bets for another increase this month climbed above 70%, according to pricing in federal funds futures.

That changed after two key FOMC voting members — New York Fed President John Williams and Vice Chair Philip Jefferson — said the central bank’s September move had bought time to assess the state of the economy.

The odds of a hike in investors’ eyes promptly fell below 30% and have continued to drop. They stood below 10% earlier on Wednesday.

Warsh weighed in on Oct. 16, when he said “the world has broadly conformed to our expectations” since the Fed’s September meeting.

Markets interpreted that as a decision not to reset investor expectations, and thus an implicit signal that officials were likely to leave rates unchanged.

The dissent by Cook comes as she continues to challenge President Donald Trump’s attempt to fire her.

Administration officials have scheduled a hearing at the White House in early November to examine allegations of mortgage fraud that Cook has long denied.

Cook has said she would not be able to attend the hearing.