Fed Expected to Pause as Warsh Faces a High-Stakes Communication Test

The Federal Reserve is widely expected to leave rates unchanged at its meeting ending Thursday, after unanimously raising the federal funds target range by 25 basis points in September to 3.75%-4.00%. The key market focus is how Chair Kevin Warsh explains a pause and whether he signals a possible December hike. CME data cited in the source showed the probability of another 25-basis-point October increase had fallen below 10%, while about three-quarters of traders expected at least one further increase by year-end. Inflation data remain central to the decision. September CPI rose 3.7% year on year, while the September PCE price index is due Thursday; economists expect headline PCE inflation to rise from 3.4% in August to 3.6%. The unemployment rate stood at 4.2% in September. Bond-market volatility is also part of the policy backdrop. After the September hike, the 10-year Treasury yield briefly exceeded 5.3%, around a 24-year high. It later fell about 19 basis points in one day to 4.95%, described as its largest daily decline since March 2023. The December meeting is the next scheduled Fed policy meeting, when officials will receive additional inflation, employment and growth data and update quarterly projections.