Fed holds benchmark rate at 3.75% to 4% in 10-2 vote; Cook and Hammack dissent in favor of a hike

The Federal Reserve's Federal Open Market Committee on Wednesday, Oct. 28, kept the target range for the federal funds rate at 3-3/4% to 4%, according to the policy statement released at 2 p.m. EDT. The committee approved the statement by a 10-2 vote.¹

Fed Governor Lisa D. Cook and Cleveland Fed President Beth M. Hammack voted against the action. According to the statement, both “preferred to raise the target range for the federal funds rate by 1/4 percentage point at this meeting.” The statement names only the two dissenters, not the members who voted in favor.¹ The Associated Press reported that it was Cook's first dissent since she joined the Board in 2022.² Yahoo Finance reported it was Hammack's second dissent in favor of a hike since July.³

What changed from September

At its previous meeting, on Sept. 16, the committee raised the range by 1/4 percentage point to 3-3/4% to 4%, in a 12-0 vote with no dissents.⁴

Compared with the September statement, the October text:

• Describes economic activity as expanding “at a strong pace,” where September said “at a solid pace.”¹⁴
• Replaces September's sentence that the rate increase “will support a timelier return” to the 2% goal with a new one: “The accumulation of more information will help the Committee determine the policy stance appropriate to ensure a timely return of inflation to the Committee's 2 percent goal.”¹⁴
• Keeps unchanged the sentences on elevated inflation and uncertainty, resilient spending, productivity and investment, job gains and the unemployment rate, and the line “The Committee will deliver price stability.”¹⁴

Balance sheet and administered rates

The committee made no change to its balance sheet policy. The statement says it is continuing to maintain ample reserves in the banking system.¹ The implementation note, effective Oct. 29, keeps interest on reserve balances at 3.90%, the standing overnight repo rate at 4.0%, the overnight reverse repo offering rate at 3.75% with a limit of $160 billion per counterparty per day, and the primary credit rate at 4.0%.⁵ Those are the same levels the September note set, effective Sept. 17.⁶

The trading desk's directives on Treasury rollovers, reinvestment of agency principal into Treasury bills and purchases to keep reserves ample are also unchanged from September.⁵⁶

What Warsh said

At his news conference, Chair Kevin Warsh said, “Politics played no role in the decision,” and said he “didn't hear an utterance about politics” during the two-day meeting, the AP reported. He also said, “There is no soft inflation target,” according to the AP.²

Warsh said that since the September action, “we have started to see some changes in financial and credit conditions,” American Banker reported. He added that while overall conditions were tighter, “I'm unwilling and unable to call them tight.”⁷

Warsh also said inflation has been above the committee's objective “for close to six years,” and that on the employment side, “conditions are quite positive,” according to The National News Desk. He said eight meetings a year is “the right number” for the committee, that one 2027 meeting would focus on strategy with no rate vote or policy statement anticipated, and that in 2028 two meetings would be devoted to strategy and six to setting policy, the outlet reported.⁸

What the records do not show

• The statement does not give the committee's expected path for rates or say what it will do at its next meeting, Dec. 8-9.¹²
• The statement does not name the 10 members who voted for the action or give the dissenters' reasons beyond their stated preference.¹
• Warsh's remarks quoted here come from news reports, not from an official Fed transcript.
• Minutes of the meeting have not been released.