Fed leaves rates steady as governor Lisa Cook dissents
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Federal Reserve chairman Kevin Warsh speaking to reporters Wednesday. Photo: Al Drago/Bloomberg via Getty Images.
The Federal Reserve left interest rates unchanged Wednesday, with two officials dissenting, including Lisa Cook, the governor President Trump is seeking to fire.
Why it matters: Fed officials have signaled they may raise rates again by year-end but are in no hurry, preferring to move gradually with more data in hand.
What's new: Fed Chair Kevin Warsh announced a shake-up of the central bank's meeting schedule.
- Starting next year, one of the Fed's eight annual meetings will focus exclusively on "broad monetary policy strategy," with no rate decision or policy statement expected.
- Warsh expects two meetings to be devoted to strategy in 2028, leaving six for setting rates.
- "It's equally important we reserve time and space as an intellectually diverse group for strategic deliberations," Warsh said.
Zoom out: The Fed held its benchmark interest rate at 3.75% to 4%, with Cook and Cleveland Fed President Beth Hammack dissenting in favor of a quarter-point hike.
- The Fed said it needs more information to determine the appropriate policy stance and described economic activity as expanding at a "strong" pace, up from "solid" in September.
The intrigue: It was Cook's first dissent as a Fed official, coming ahead of a White House hearing on her potential removal over alleged mortgage fraud.
- The Supreme Court sided with Cook in an earlier Trump attempt to remove her. Her lawyers say the allegations are a pretext for firing her.
- Washington-based Fed governors have historically rarely dissented from policy decisions, though that norm has broken down since 2024.
- Asked whether he or the Fed would participate in next week's White House hearing on Cook, Warsh said, "Not to my knowledge."
What to watch: Warsh pushed back on the notion that the AI investment boom is insulated from higher interest rates, citing widening credit spreads and signs of investors becoming more selective.
- "Interest rates get in the cracks. Interest rates affect directly or indirectly almost everything," Warsh said. "I don't believe that they're somehow divorced from the rest of the economy."
State of play: Traders see an 85% chance of a December rate hike, according to CME's FedWatch tool.
- Inflation remains above the Fed's 2% target. Thursday's PCE report is expected to show prices rose 3.6% over the year through September.
- Hawks including Hammack argue that inflation pressures are broadening, warranting higher rates.
Editor's note: This story has been updated with details from Federal Reserve chairman Kevin Warsh's news conference.
