The Federal Reserve held its benchmark interest rate steady on October 28, keeping the target range for the federal funds rate at 3.75 to 4 percent, but two policymakers dissented in favor of a further quarter-point increase.

The Federal Open Market Committee (FOMC) approved the decision by a 10–2 vote. Lisa D. Cook and Beth M. Hammack voted against it, preferring “to raise the target range for the federal funds rate by 1/4 percentage point at this meeting,” according to the statement released at 2 p.m. Eastern Time.

The pause follows the committee’s September 16 decision to raise the range by a quarter point to its current level, a move approved 12–0. At the time, the committee said the increase “will support a timelier return to the Committee’s 2 percent goal” for inflation.

What the statement said

The committee upgraded its description of growth, saying “economic activity is expanding at a strong pace,” compared with “a solid pace” in September. It said that while uncertainty “remains elevated owing, in part, to geopolitical developments, domestic spending has been resilient,” and that productivity growth is strong and capital investment robust. Job gains “have kept pace with the workforce, and the unemployment rate has changed little,” it said.

On prices, the committee repeated that “inflation remains elevated.” Instead of signaling a next step, it said: “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.” It closed with the sentence: “The Committee will deliver price stability.”

In an accompanying implementation note, the Fed’s Board of Governors voted unanimously to keep the interest rate paid on reserve balances at 3.90 percent, effective October 29. The committee directed its trading desk to conduct standing overnight repurchase agreement operations at 4.0 percent and overnight reverse repurchase operations at an offering rate of 3.75 percent, with a per-counterparty limit of $160 billion a day. The board also approved keeping the primary credit rate at its existing level of 4.0 percent.

The inflation backdrop

The most recent consumer price data, published by the Bureau of Labor Statistics on October 14, showed the consumer price index rising 0.6 percent in September on a seasonally adjusted basis and 3.7 percent over the previous 12 months. Energy prices were up 20.4 percent from a year earlier and gasoline 34.2 percent. “The index for gasoline rose 9.1 percent in September, accounting for over half of the monthly all items increase,” the bureau said.

Excluding food and energy, so-called core prices rose 0.3 percent in September and 2.6 percent over 12 months. Food prices were 2.5 percent higher than a year earlier, and shelter costs 3.2 percent higher.

Why it matters

For banks, businesses and households, the decision means no further change for now in the policy rate the Fed raised in September. The administered rates the Fed uses to implement policy stay at 3.90 percent on reserve balances, 4.0 percent for standing repurchase operations and primary credit, and 3.75 percent for overnight reverse repurchase operations.

The two dissents show that some committee members favored tightening further at this meeting, while the majority chose to wait for more information. With headline inflation at 3.7 percent in September, more than half of that month’s increase coming from gasoline, and core inflation at 2.6 percent, the statement ties the committee’s next move to incoming information rather than to a stated direction.

What to watch

The committee’s next scheduled meeting is December 8–9, which will include a new Summary of Economic Projections, according to the Fed’s meeting calendar. Minutes of regularly scheduled meetings are released three weeks after the policy decision. The Bureau of Labor Statistics is scheduled to publish October consumer price data on November 10.

The caveats

The statement does not say whether the committee expects to raise rates again, and the Fed did not publish new economic projections at this meeting. The September consumer price figures reflect a single month in which gasoline prices rose 9.1 percent; October data are due on November 10, before the committee’s December meeting.

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