Takeaway: The Fed skipped hiking rates at today’s meeting, as expected. But they set up a hike at the December 9th meeting.
The Fed’s main message: Future hikes may be necessary because the economy is strong and inflation is too high. But they’re also patient, willing to skip hiking at some meetings in the interest of waiting for more data.
- The committee voted 10-2 to hold rates steady today, as expected. The dissents came from Cleveland Fed President Beth Hammack and Fed Governor Lisa Cook. The dissent from Cook was a surprise because she is generally seen as a dove, and most observers expected the second dissent to come from Dallas Fed President Lorie Logan instead.
- Chairman Kevin Warsh was clear, however, that they are not done hiking, saying “I’m unwilling and unable to call overall financial conditions tight,” and “We haven’t achieved price stability, but we’re working on it.”
- An every-other-meeting hike cadence is in line with recent comments from other Fed officials who have also expressed a desire to keep hiking in the face of a stronger economy, but also a willingness to wait for data.
- Ultimately, the December hike will come down to the data releases between now and then. If the data comes in as expected, a hike feels all but guaranteed.
Chairman Warsh also announced a big change for Fed meetings starting next year, setting aside one meeting for big picture deliberation.
- He was light on details, but starting in fall 2027, the Fed will continue to have eight meetings a year. However, only seven of those will be “live” meetings where the committee will vote on rate policy and release a post-meeting statement. The remaining meeting will be used to discuss broad monetary policy strategy.
- And in 2028, the ratio will change further with two out of eight meetings reserved for big picture discussion.
- While a significant change to Fed practice, this announcement is also not so surprising given the Chairman’s desire to fundamentally question how the Fed works. That being said, should economic conditions warrant it, the Fed could always call emergency meetings to adjust rates.
