Fed holds rate at 3.75% to 4%, two officials dissent

The Federal Reserve kept its benchmark interest rate at a target range of 3.75% to 4% on Wednesday, a level it has held since raising it last month for the first time in three years. Ten members of the Federal Open Market Committee voted for the hold. Two voted to raise the rate by 0.25 percentage points: Fed Board Governor Lisa Cook and Cleveland Federal Reserve Bank President Beth Hammack.

The decision landed less than a week before the midterm elections, where affordability is a leading voter concern. President Trump has pressed the Fed to lower borrowing costs. The central bank's statement said economic activity is growing at a "strong pace" and that inflation remains elevated.

The path to Wednesday's meeting ran through a September rate increase, the first in three years, followed by a run of price data that came in above forecasts. Last month, the Consumer Price Index and core inflation, which excludes food and energy, both rose 2.6% from a year ago. Both readings exceeded what economists had projected.

Chairman Kevin Warsh told reporters after the decision that inflation remains "too high" and that the Fed has not yet brought it under control. "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," he said. "It's our responsibility to get inflation down."

Warsh described the debate inside the committee in blunt terms. "We just came out of a heck of a family fight, a serious, sober discussion," he said. "I think we came to the right policy decision for this moment." He declined to say whether rates would move at the next gathering, telling a reporter, "A lot of things can happen, so I'm not going to be able to share with you my musings about what happens when this group gets together six weeks from now."

Wall Street had expected the Fed to hold. The three major indexes were essentially flat after the announcement. Michael Pearce, chief U.S. economist at Oxford Economics, wrote in an email that the two dissents, the policy statement wording and prior comments from officials "all suggest the central bank will hike rates in December." Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics, said markets are pricing in an additional 0.75 percentage points of tightening over the next year.

Warsh also announced a change to the Fed's calendar. The committee will continue to meet eight times a year, but starting in 2027 one of those sessions will be set aside for policy discussion and strategy, with no rate vote and no statement issued. By 2028, Warsh said he expects two meetings devoted to policy discussion and six to rate decisions.

The Fed's next policy meeting is scheduled for Dec. 8-9.