Fed holds rates steady despite inflation being too high

10-2 vote to keep policy unchanged The Federal Reserve voted 10-2 in favour of leaving the Fed funds target rate range at 3.75%-4%. Only 2bp of a potential 25bp hike was priced ahead of the decision and only 6 of 97 organisations polled by Bloomberg predicted a hike, so this was no surprise and market reaction has been limited.

Senior Fed officials, including Vice Chairs Philip Jefferson and Michelle Bowman and Governor Chris Waller, suggested ahead of the decision that they were prepared to move cautiously, seeing little need for back-to-back rate hikes after September’s policy change. Nonetheless, Beth Hammack and Lisa Cook both felt that the current situation warranted additional action. Cook’s vote for a hike was a surprise given the general sense that she was a centrist, and it will do nothing to improve her fraught relationship with President Trump. Instead, we had suspected it would be one or both of Neel Kashkari and Lorrie Logan (who both also dissented in July) that would join Hammack in voting in favour of a further rate hike.

There aren’t many changes in the accompanying press release, with the economy described as “expanding at a strong pace” and “inflation remains elevated”. There was no pre-commitment to further action, with it being the data that “will help the Committee determine the policy stance appropriate to ensure a timely return of inflation to the Committee’s 2 percent goal.”

This story was originally published by Hellenic Shipping News. Read the full story at Hellenic Shipping News →