The Federal Reserve is expected to hold interest rates steady on Wednesday, despite hotter-than-expected September inflation data. If they do stay put, Fed Chairman Kevin Warsh could face pressure to explain why policymakers aren’t acting now after voting unanimously last month to raise rates to address burgeoning inflation.
“The Fed is overwhelmingly likely to skip the October meeting, in line with market expectations,” said Stephanie Roth, chief economist at Wolfe Research. But following September reports on consumer and producer prices, she added, “We think Warsh and other FOMC members are increasingly concerned about inflation and remain intent on raising rates further, and will subtly signal that.”
Projections released last month signaled Fed officials supported one additional hike this year, a forecast Warsh is likely to be asked about when he speaks to reporters after the meeting. Investors on Tuesday saw less than a 10% chance of a quarter-point move this week, but priced in a hike at the final policy meeting of the year in December. The Fed will release a post-meeting statement at 2 p.m. Wednesday in Washington, and Warsh is scheduled to hold a press conference 30 minutes later.
A few key Fed officials used the lead-up to this week’s meeting to push back against expectations for a hike this month. Fed Vice Chair Philip Jefferson and New York Fed President John Williams said in separate speeches roughly a month ago that they believe the central bank has time to assess the economy before considering another rate increase. Fed Governor Christopher Waller later said officials have some flexibility on timing and don’t need to tighten at consecutive policy meetings. Three regional Fed presidents dissented when the central bank held rates steady in July, preferring to raise rates by a quarter point — an action they could repeat this month.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing