The Federal Reserve left interest rates unchanged Wednesday, with two officials dissenting, including Lisa Cook, the governor President Trump is seeking to fire.
Why it’s important: Fed officials have indicated they could raise rates again by the end of the year, but are in no rush, preferring to act gradually with more data in hand.
What’s new: Fed Chairman Kevin Warsh announced a reshuffle of the central bank’s meeting schedule.
- Starting next year, one of the Fed’s eight annual meetings will focus exclusively on “overall monetary policy strategy,” with no rate decisions or policy statements expected.
- Warsh expects two meetings to be devoted to strategy in 2028, leaving six for rate setting.
- “It is equally important that we reserve time and space as an intellectually diverse group for strategic deliberations,” Warsh said.
Zoom out: The Fed kept its benchmark interest rate between 3.75% and 4%, with Cook and Cleveland Fed President Beth Hammack disagreeing in favor of a quarter-point hike.
- The Fed said it needed more information to determine the appropriate policy direction and described economic activity as growing at a “strong” pace, up from “solid” in September.
The plot: It was Cook’s first dissent as Fed official, ahead of a White House hearing on his possible impeachment for alleged mortgage fraud.
- The Supreme Court sided with Cook in a previous attempt by Trump to impeach her. Her lawyers say the allegations are a pretext to fire her.
- Washington-based Fed governors have rarely disagreed with policy decisions, although that norm has collapsed since 2024.
- Asked whether he or the Fed would participate in next week’s White House hearing on Cook, Warsh said, “Not to my knowledge.”
What to watch: Warsh pushed back on the notion that the AI investment boom is isolated from rising interest rates, citing widening credit spreads and signs of greater investor selectivity.
- “Interest rates fall through the cracks. Interest rates directly or indirectly affect almost everything,” Warsh said. “I don’t believe they are somehow cut off from the rest of the economy.”
State of affairs: Traders see an 85% chance of a rate hike in December, according to CME’s FedWatch tool.
- Inflation remains above the Fed’s 2% target. Thursday’s PCE report is expected to show prices rose 3.6% in the year through September.
- Hawks, including Hammack, say inflationary pressures are growing, justifying higher rates.
Editor’s note: This story has been updated with details from Federal Reserve Chairman Kevin Warsh’s news conference.
Gn headline
