No change in October, though confidence in the economy’s strength and two dissents point to a hike in December.
The FOMC held at their October meeting, albeit with two dissents, Governor Cook and Cleveland Fed President Hammack preferring to hike by 25bps at this meeting. The statement was short and, in the press conference, Chair Warsh again declined to provide definitive guidance on the near-term policy outlook.
The Committee remains positive on economic activity, characterising it in the statement as “expanding at a strong pace” (an upgrade from “solid” in September). Despite elevated uncertainty, “domestic spending has been resilient”, underpinned by “strong” productivity growth and “robust” capital investment. Chair Warsh subsequently also emphasised the breadth of economic growth outside of tech-related investment. Labour demand and supply were represented as balanced and resilient in both the statement and press conference.
The Committee refrained from spotlighting key price risks in the statement. However, inflation “remains elevated” and the FOMC are determined to achieve a “timely” and sustainable return of annual consumer inflation to 2.0%yr after 6 years above target.
Along with the two dissents, this guidance and the “accumulation of more information will help the Committee determine the policy stance” suggests another 25bp hike is likely in December. Thereafter, the FOMC will remain attentive to any broadening in inflation and related risks through 2027.
Towards the end of the press conference, Chair Warsh also announced a structural change in the FOMC schedule. While there will still be 8 meetings in 2027, a meeting in the fall will focus on monetary policy strategy versus the current stance of monetary policy. Chair Warsh then intends for 2 of the 8 meetings in 2028 to have this strategy focus. If realised, this will see the FOMC review and vote on the current stance of monetary policy just 6 times per calendar year from 2028.
