Fed Holds at 3.75%-4% as Warsh Gives No December Signal

The Federal Reserve held its federal funds target range at 3.75%-4% after a 10-2 FOMC vote. Governor Cook and Cleveland Fed President Hammack dissented, each favoring another 25-basis-point increase. Chair Warsh gave no clear guidance for the December meeting, saying policy discussions remain focused on price stability and that the Fed needs more economic information before judging the appropriate stance. The Fed reiterated that inflation remains elevated, while upgrading its description of economic activity from “solid expansion” to “strong expansion.” The decision follows a 25-basis-point rate increase in September. Warsh said that move’s effects on financial markets have been broadly in line with expectations. He noted that credit spreads have widened in some assets and capital allocation has become more cautious, while declining to characterize current financial conditions as restrictive. The Fed continues to target 2% inflation measured by the PCE price index. September CPI posted its highest year-over-year increase in five months, with energy prices a key driver and price increases broadening across goods and services. The Fed was set to receive an update on September PCE data on Thursday. Warsh also cited stronger growth: first-half GDP growth was revised to 2.4% from 1.8%, and third-quarter growth could exceed 3%. He said business investment may record double-digit growth, with AI-related capital spending a tailwind, though higher financing costs are increasingly affecting technology and other assets.