In Brief
- The FOMC voted 10–2 to maintain the Federal Funds target range at 3.75%–4.00%, with two members favoring a 25-bp rate hike.
- The Fed upgraded its assessment of economic growth from “solid” to “strong,” while inflation remains elevated, keeping the door open to a potential rate hike in December.
- With tighter policy largely priced in, upcoming jobs and inflation data will be key to the Fed’s next move, while equity markets are likely to remain driven by economic and corporate fundamentals.
At its October meeting, the Federal Open Market Committee (FOMC) voted 10–2 to maintain the target Federal Funds rate range at 3.75–4.00%. The two dissenters were Cleveland Federal Reserve (Fed) President Beth M. Hammack and, somewhat surprisingly, Fed Governor Lisa Cook, both of whom favored a 25-bp rate increase.
Two items stand out in today's statement: the growth language was upgraded from "solid" to "strong," and while inflation is still described as "elevated," the Committee added that "the accumulation of more information will help the Committee determine the policy stance appropriate" to achieve its 2% inflation mandate. This added language could read as hawkish, but it also preserves optionality to hike in December—or hold.
At the press conference, Fed Chair Kevin Warsh outlined changes to the FOMC meeting calendar beginning next year. The Fed will continue meeting eight times annually; however, starting in 2027, one meeting each year will focus on broad monetary policy strategy, with no updates to economic projections or rate changes, while the remaining seven will be "live." In 2028, this shifts to six live meetings and two dedicated to strategy. It's unclear what materials, if any, will be publicized from the strategy sessions, but since no rate decisions occur there, they will likely draw far less attention. This marks the start of a new era of "forward silence" at the Fed, and further changes to Fed communications—particularly the Summary of Economic Projections and the dot plot—may follow.
Warsh continued to emphasize strong growth outside of AI investment, along with the Fed's commitment to its 2% inflation mandate. He also acknowledged that financial conditions have tightened, suggesting recent market developments may reduce the need for aggressive future tightening.
Overall, there were few surprises at today's meeting. Upcoming jobs and inflation data will be key in determining whether the Fed hikes in December. Markets continue to assign a high probability that the Fed will raise rates in December, and again in March. For investors, with tighter policy already priced in, rates are likely to stay rangebound, while equities will likely be driven by fundamentals.
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