Fed votes split decision to keep interest rates steady despite persistent inflation

With less than a week until the midterm elections, the Federal Reserve kept interest rates unchanged on Wednesday, even as the latest inflation reports show prices rising again.

The central bank voted in a split decision to keep its benchmark interest rate stable within a range of 3.75% to 4%, after raise rates last month for the first time in over three years.

Cleveland Fed President Beth Hammack and Fed Governor Lisa Cook broke ranks, preferring to raise rates by a quarter of a percentage point. This is the second time since July that Hammack has expressed dissent in favor of a rate increase and Cook’s first dissent since his tenure.

Learn more: Follow live updates from the October Fed meeting

Officials said they were focused on reviewing additional data to inform future rate decisions, adjusting their policy statement to say that “the accumulation of more information will help the Committee determine the appropriate policy direction to ensure a rapid return of inflation to the committee’s 2 percent target.”

The latest inflation reports show that price growth has accelerated since September’s rise.

The consumer price index stood at 3.7% last month, compared to 3.4% in August. Excluding volatility in food and energy prices – the Fed’s way of looking at underlying inflation – the CPI rose 2.6%, up from 2.4% in August. Wholesale prices jumped more than 6% last month, and the Fed’s preferred inflation gauge — the core personal consumption expenditures price index, scheduled for release Thursday — is expected to exceed 3%.

Fed Chairman Kevin Warsh, in a news conference Wednesday afternoon, acknowledged that the task of containing inflation was unfinished.

“If you were listening next to me in this room over the last few days, the overwhelming consensus, the overwhelming judgment, is that what we have done in this monetary medicine is starting to work, but there are no definitive conclusions,” Warsh said. “I’m encouraged by the progress we’ve made in a short time. But if the gist of your question is ‘you haven’t delivered yet, you haven’t achieved price stability,’ you’re right.

“But we are working on it.”

Learn more: What the Fed’s interest rate decision means for your money

Warsh announced a change in the schedule of meetings of the Federal Open Market Committee, starting next year. They will still meet eight times a year, but one of them “will focus exclusively on general monetary policy strategy, with no vote on the federal funds rate or any planned policy statements,” Warsh said.

In 2028, he said, two meetings will be devoted to strategy and six to policy definition.

The officials also reiterated in their statement that uncertainty remains high in part due to geopolitical developments, but that domestic spending has been resilient and productivity and capital investment are strong.

A chorus of Fed officials calls for further rate hikes to reduce persistent inflation, while leaving the timetable flexible. But top leaders of the interest rate-setting committee said the central bank should take time to monitor and assess whether inflation is falling in a timely manner.

Hammack said a few weeks ago that she prefers more frequent and smaller rate adjustments to ensure an inflationary mentality doesn’t set in, as she believes inflation is widespread and will take time to come down.

The Fed’s actions come just five days before the midterm elections. President Trump has claimed that the central bank’s interest rate policy is hurting the economy more than inflation.

“Politics played no role in this decision,” Warsh said Wednesday.

The committee meets again in six weeks, on December 9. The CME FedWatch tool currently estimates that traders give an 86% chance of a quarter-point rise at the end of the year.

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