Fed Rate Decision and Warsh Press Conference: 5 Takeaways

The Federal Reserve voted Wednesday to maintain its benchmark interest rate. In the press conference that followed, Fed Chairman Kevin Warsh revealed some of his thoughts on the state of the U.S. economy and how that affects monetary policy. But for Fed fans, perhaps the big news was Warsh’s reveal of some upcoming procedural changes.

Here are five key points to remember:

1. No surprise: Markets widely expected the Fed to maintain monetary policy, and that’s exactly what it did. In explaining its decision, the Federal Open Market Committee emphasized a patient approach, saying: “The accumulation of more information will help the Committee determine the appropriate policy position to ensure a rapid return of inflation to the Committee’s 2 percent target.”
2. Well, a surprise: If there was one eyebrow-raising moment of the afternoon, it was Warsh’s revelation of changes to how the FOMC will meet. In 2027, the committee will meet eight more times, but one of the meetings will not involve a vote on interest rates or a post-meeting statement. “Strategic” meetings will increase to two next year, leaving only six possibilities to adjust rates, apart from emergency meetings.
3. OK, two surprises: The FOMC vote to keep policy where it is was widely expected. The dissent of several members was also not a surprise. But one of the “no” votes coming from Gov. Lisa Cook was stunning. Governors rarely object to rate votes, and Cook hasn’t done so at all since taking her seat in 2022. Cleveland Fed President Beth Hammack also opposed the move. Both will likely provide statements explaining their vote before the end of the week.
4. The impact of AI: Warsh took the opportunity to talk about the impact of artificial intelligence on economic growth, essentially saying that it was just one of many factors behind an expansion that he said was strong.
5. No more musical chairs: The September meeting included a shortened post-meeting press conference – cut from the usual 45 minutes to half an hour, around the time of Wednesday’s event. Additionally, journalists were limited to a single question, a change from previous practices where members of the media took a “two-for-one” approach. Finally, Warsh changed the seating arrangement in the hall from a largely arbitrary approach – with representatives from larger formations up front – to an alphabetical order last month. This month, the alphabetical order was reversed, keeping microphone bearers on their toes.

What they say:

“The Fed is being patient. It appears that it prefers to wait for further information on the appropriate level of rates, while uncertainty reigns supreme in light of recent geopolitical developments.” —Phil Camporeale, chief investment strategist, JPMorgan Wealth Management.

“The Fed has time on its side… But the direction ahead remains clear. The Fed continues to roll back some of last year’s rate cuts, and both divergences underscore this tightening bias. We expect a hike in December and another in early 2027.” — Seema Shah, Chief Global Strategist, Principal Asset Management.

“We hesitate to characterize his communication as particularly dovish or hawkish…The bottom line is that the Fed’s policy response is not a black-and-white binary thing…The market has adapted to Warsh’s communication style, but there may be a way to go before they are completely on the same page.” — Thomas Simons, Chief US Economist, Jefferies.