The Fed pauses as two voters seek a rate increase
· BehindLines newsroom
The US Federal Reserve decided on October 28 to keep its policy rate in a range of 3.75% to 4%. Its statement records ten votes in favour and two against. The dissenters wanted an increase, making this pause different from unanimous agreement on the level of interest rates.
One decision, two assessments
In the central bank's statement, Lisa Cook and Beth Hammack call for an increase of a quarter of a percentage point. They are therefore not proposing a reduction in borrowing costs. The committee also describes economic activity as growing at a solid pace, while judging inflation to remain elevated.
Its inflation target stays at 2%. It intends to draw on more information to determine the course of policy. The hold concerns the meeting that has just ended; the statement does not promise to keep that range at subsequent meetings.
September provides context
Reuters, in its report carried by MarketScreener, recalls that the Fed raised rates by a quarter of a point in September. October's decision interrupts that upward movement without reversing the previous increase.
The agency also reports remarks by Kevin Warsh at his press conference. The Fed chair considers it possible to bring inflation towards its target without necessarily weakening growth or employment. That is his assessment of the outlook, rather than an outcome already achieved.
A follow-up to the calendar, before the statistics
Our article of October 27 described the sequence linking the monetary policy meeting with releases of GDP and PCE price data. This update concerns the decision that has now been announced.
The sequence matters: a statistical release issued after the vote must not be described as information already available at that moment. The pause has been decided; the subsequent path will depend on new information and new decisions.