Fed Set to Hold Rates Steady Today as Chair Warsh Navigates an Inflation Squeeze
Economists overwhelmingly expect the Federal Reserve to leave rates unchanged this afternoon, even as inflation accelerates and hiring slows — a bind that's testing Chair Kevin Warsh's first real stretch at the helm.
WASHINGTON — The Federal Reserve is widely expected to leave its benchmark interest rate unchanged when it wraps up its two-day policy meeting this afternoon, holding steady in a range of 3.75% to 4.00% as Chair Kevin Warsh navigates his first real inflation squeeze since taking over the central bank.
Futures markets have priced in roughly a 90% probability of a hold, according to FXStreet, and a Reuters survey found that 94 of 100 economists polled expect no change today — though all 100 forecast another hike in December. The Fed's decision is due at 2 p.m. ET, followed by Warsh's press conference roughly half an hour later.
Inflation Won't Cooperate
The case for standing pat is complicated by stubborn price pressures: September inflation accelerated to 3.7% year-over-year even as the labor market cooled sharply, with nonfarm payrolls rising by just 29,000 last month. Faster inflation paired with a weakening jobs picture is the classic bind that leaves central bankers with no clean answer — cutting risks fueling inflation further, while hiking risks tipping a softening labor market into something worse.
The meeting comes a little over a month after the Fed's September rate hike of 25 basis points, and it's one of the first scheduled decisions investors are watching closely under Warsh, who has called for what he's termed "regime change" at the central bank and favors shrinking its balance sheet to create room for future rate cuts.
NINETY-FOUR OF 100 ECONOMISTS SURVEYED EXPECT NO CHANGE TODAY — BUT EVERY ONE OF THEM EXPECTS A HIKE IN DECEMBER
Markets have mostly shrugged off the uncertainty so far this week. The S&P 500 and Nasdaq posted back-to-back gains Monday and Tuesday, lifted by a rally in chip stocks and falling oil prices, according to CNBC. Investors have largely treated today's meeting as a formality, saving their attention for December, when the real fight over direction is expected to play out.
What's next: Warsh's afternoon press conference will be parsed line by line for hints about December, when traders widely expect the Fed's next move to be up, not down. A hike into a softening labor market would mark an unusual sequence for a central bank that has historically moved more cautiously when unemployment is rising.