The Fed rate decision left US borrowing costs unchanged at 3.75% to 4.00% early Thursday, 29 October MYT, but two policymakers wanted another increase. The 10-2 vote keeps the inflation debate open rather than signalling that the tightening cycle has definitively ended.
The Federal Reserve released its official policy statement at 2:00 AM MYT. Governor Lisa Cook and Cleveland Fed President Beth Hammack dissented, preferring a quarter-percentage-point increase.
The committee described US economic growth as strong, with resilient domestic spending and robust investment, while inflation remained elevated. It said further information would help determine the policy stance needed to return inflation to its 2% goal.
Fed Rate Decision Leaves the Next Move Open
The result was a hold, not a rate cut. The statement did not commit the committee to a December increase either. The distinction matters for traders comparing the immediate decision with expectations for the next meeting.
Reuters' account carried by MarketScreener said the outcome was expected. Chairman Kevin Warsh argued that inflation could be brought down without deliberately weakening growth or pushing people out of work.
Reuters also reported that Warsh saw somewhat tighter credit conditions following the higher policy rate, including potential effects on business investment. He pointed to improved productivity as a possible reason the economy could expand faster without generating the same inflation pressure.
That is the chairman's assessment, rather than proof that price pressures have disappeared. The two dissents show that other voting members favoured a stronger immediate response. The next inflation and activity releases will test those competing judgements.
Implementation Rates Remain Separate From the Target Range
The accompanying implementation note kept the rate paid on reserve balances at 3.90%. It also specified a 4.00% standing overnight repurchase rate and a 3.75% overnight reverse-repurchase offering rate.
The note retained a US$160 billion daily limit per counterparty for the reverse-repurchase facility. It instructed the New York Fed's trading desk to conduct operations consistent with the unchanged federal-funds target range.
These operating rates support implementation of monetary policy. They should not be described as a new set of retail borrowing offers, or confused with the 3.75%-4.00% target range itself. Their effective date in the note is 29 October.
Why Malaysian Readers Are Watching
The decision is relevant to investors following dollar funding, currencies and internationally traded assets. It does not set Malaysia's policy rate or automatically change the price a Malaysian bank charges an individual borrower.
BullBuzz's Thursday Malaysian gold update records the separate local bullion quotations. A US policy announcement and a Malaysian retail quote describe different observations; the entire local price change cannot be assigned to the Fed without evidence.
The latest RBNZ decision provides another example of a central bank holding rates amid disagreement over the outlook. Each institution has its own economy, policy mandate and decision timetable.
What Comes Next for Inflation and Growth?
The US Bureau of Economic Analysis calendar schedules the advance third-quarter GDP estimate and September Personal Income and Outlays release for 8:30 PM MYT on Thursday. The latter includes the PCE price measures watched by the Fed.
Those are scheduled releases, not figures already available at publication. GDP will provide an initial estimate of quarterly growth, while the inflation data will add another observation to the debate over the appropriate policy setting.
For the next decision, the useful comparison is between the incoming evidence and the committee's inflation objective. An unchanged rate today leaves room for a different decision later; the Fed has not promised a particular outcome.
Photo: Reuters/Kylie Cooper via StreetInsider. Kevin Warsh speaks after the policy meeting in Washington, 29 October MYT.