Focus Shifts to Warsh’s December Rate-Hike Signal After Fed Decision

The Federal Reserve is expected by markets to leave interest rates unchanged at its upcoming decision, shifting attention to Chair Kevin Warsh’s guidance on whether a December rate hike remains possible. The policy focus follows the Fed’s September rate increase, described as the first since 2023. Quarterly rate projections had indicated one more possible increase across the remaining two meetings of the year, while officials later emphasized that further tightening need not occur at consecutive meetings. Inflation remains central to the debate. September consumer and producer price data were above expectations, and economists expect the September PCE price index to rise 3.6% year over year, compared with 3.4% in August. The September unemployment rate was 4.2%. Financial conditions have also tightened through bond markets. The 10-year US Treasury yield rose above 5% after the September hike and reached about 5.365% on October 7, a 24-year high. It later fell by about 19 basis points to around 4.95% last Thursday after a technology-stock selloff directed funds toward Treasuries. Officials remain divided on the appropriate path. Dallas Fed President Logan had supported at least another 50 basis points of increases, while Cleveland Fed President Hammack favored smaller, faster-paced tightening. Markets will watch the policy statement, any dissent, Warsh’s press conference, and incoming PCE, employment and third-quarter GDP data before the December meeting.