The Federal Reserve held its benchmark interest rate at 3.75%-4.00% today, but two of the 12 voters wanted to raise it again. The Federal Open Market Committee (FOMC), the Fed’s rate-setting body, decided 10-2 at its first meeting since September’s hike.
The dissenters wanted a quarter-point rise. A dissent is simply a member voting against the decision, and the statement named both.
Voting against the monetary policy action were Lisa D. Cook and Beth M. Hammack, who preferred to raise the target range for the federal funds rate by 1/4 percentage point at this meeting.
Federal Open Market Committee
That is a sharp change from the 16th of September, when the committee raised the range by 25 basis points (hundredths of a percentage point) with no one against.
| Item | 16 September | 28 October |
|---|---|---|
| Decision | 25bp hike | Hold |
| Range after decision | 3.75%-4.00% | 3.75%-4.00% |
| Vote | 12-0 | 10-2 |
| Dissents | None | Lisa D. Cook, Beth M. Hammack |
Unanimity became a two-vote split in six weeks, and both dissents pointed towards tighter policy rather than looser.
The wording moved the same way. The statement now says economic activity is expanding at a strong pace, where September said solid.
September’s line that the policy action would support a timelier return to the 2% inflation goal has gone. In its place the committee says more information will help it decide the stance needed for a timely return, so the hike is no longer presented as doing the work.
With inflation still described as elevated and two members already arguing for more, the Fed is not clearly signalling that it has finished raising rates.
Markets were calm after the decision, which was scheduled for 6pm London time. The S&P 500 was up 0.16% at 7,735.04 at 7.39pm, with the US session still open, and GBP/USD was up 0.07% at 1.33257 at 7.51pm. Those small moves cannot be tied to the decision from timing alone.
A Fed split between holding and hiking points to US rates staying higher for longer, which tends to support the dollar. That feeds into sterling, into the Bank of England’s room to ease and into UK mortgage costs.