Two Fed Officials Dissent as Rates Hold at 3.75%-4%; December in Focus

The Federal Reserve kept its benchmark rate in a 3.75% to 4% range on Wednesday. Yet two of the 12 voters dissented, preferring a quarter-point hike instead.

The division sustains upward pressure on what households, businesses and investors pay to borrow. Higher borrowing costs can also draw money away from riskier assets such as stocks and Bitcoin (BTC).

Fed Keeps Rates Steady as Two Officials Push for Increase

The Fed's statement shows Governor Lisa Cook and Cleveland Fed President Beth Hammack casting the dissenting votes, each favoring a 0.25 percentage point increase.

September's increase was also 25 basis points and marked the first tightening in more than three years. That decision was unanimous among the 12 voters.

This time around, the line about policy action supporting a return to 2% inflation was dropped. In its place, the statement said additional data would guide the committee's next move.

Price growth remains the central issue. September consumer prices were up 3.7% year over year, according to Yahoo Finance.

Wednesday's meeting was also the Fed's last decision before next week's US midterm elections.

Markets Had Already Priced In a December Increase

Heading into the meeting, futures traders saw roughly an 84% probability of a rate rise at the Dec. 8-9 gathering, according to CME FedWatch. Minutes from September indicated that most policymakers anticipated one additional increase before the year closed.

Consultancy KPMG had predicted a unanimous pause, with a single dissenting vote the main risk. The actual outcome saw two officials break from the majority. Back in July, Hammack joined two other regional Fed presidents in dissenting for a rate increase; at the following meeting, the Fed did raise rates.

Not everyone is in a hurry, though. Chicago Fed President Austan Goolsbee has argued for holding off until more information arrives.

“The Fed is moving with caution instead of the conviction we saw in 2022.”

KPMG

As of Tuesday, a hold was priced in, leaving little room for surprise. After the release, bitcoin briefly hit $81,185 before easing to around $80,950 on Binance, according to TradingView data. Gold dipped 0.1%, trading near $4,036 an ounce.

Warsh Press Conference Up Next, PCE Data Due Thursday

At 2:30 p.m. ET, Fed Chair Kevin Warsh is scheduled to address the press. Thursday brings the Personal Consumption Expenditures (PCE) price index, the Fed's preferred gauge of inflation.

Morgan Stanley's Michael Gapen had argued that a pause would not be the end of rate increases. The Bank of Canada, for its part, has already lifted its rate to 2.5%, and the Bank of Japan delivers its decision on Friday. With fresh Fed projections on the agenda, the December meeting now looks like the bigger test.