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LIVE: Fed holds rates at 4% even as inflation accelerates and borrowing costs remain painfully high
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The Federal Reserve held interest rates at 3.75%–4%, with policymakers voting 10-2 to keep borrowing costs unchanged.
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Lisa Cook and Beth Hammack opposed the decision, calling for a 25-basis-point hike as inflation remains elevated.
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US stocks climbed, with the S&P 500 up 0.2%, the Nasdaq gaining 0.1%, and the Dow adding 122 points.
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Chip stocks rallied after SK Hynix reported record profits, while investors awaited major tech earnings and Kevin Warsh’s remarks.
Live Reporting
The Federal Reserve has kept interest rates at 3.75% to 4%, with 10 policymakers backing the decision and two pushing for another increase.
The Federal Open Market Committee (FOMC) also confirmed that it would stick with its current approach to keeping enough liquidity available across the banking sector.
In its policy announcement, the Fed described the US economy as healthy, pointing to steady consumer demand despite ongoing tensions around the world. Businesses are investing heavily, productivity is improving, and hiring has remained in line with the number of people entering the labor market.
The unemployment rate has barely moved, although policymakers acknowledged that prices are still rising faster than they would like.
The central bank said it needs more economic figures before deciding its next move. Its priority remains bringing inflation back to 2%, and officials reiterated their commitment to getting there.
However, the decision wasn’t unanimous. Lisa D. Cook and Beth M. Hammack opposed leaving borrowing costs where they are. Both wanted an immediate 25-basis-point increase.
Meanwhile, Wall Street traded higher on Wednesday, with investors also looking ahead to quarterly results from some of America’s biggest technology companies.
The S&P 500 rose 0.2%, while the Nasdaq Composite gained 0.1%. The Dow Jones Industrial Average added 122 points, representing a 0.2% advance.
Semiconductor stocks also had a strong session after South Korea’s SK Hynix reported its highest quarterly profit ever. Its US-listed shares jumped 13% following the results.
The gains spread across other chip companies. Micron Technology rose 4%, Arm Holdings climbed 3%, and Marvell Technology advanced more than 2%. Shares of Advanced Micro Devices (AMD) were also up roughly 2%.
The Federal Reserve is very likely to maintain rates as they are despite rising inflation above the 2% target on Wednesday.
According to CME Group’s FedWatch tool, traders see less than a 10% chance that the Federal Open Market Committee (FOMC) will raise rates again after its 25-basis-point hike in September. That would leave the benchmark interest rate between 3.75% and 4%.
While expectations of the decision have been set already, all eyes will now be on Fed Chair Kevin Warsh and his post-decision press briefing. The markets will be listening carefully to see whether there is potential for another hike in December.
The Fed won’t release a new dot plot or Summary of Economic Projections at this meeting, meaning investors won’t get updated forecasts showing where officials expect interest rates or the economy to go.
Minutes from September’s meeting showed that most Fed officials believed one more rate hike would be needed before the end of 2026. However, policymakers and economists remain divided over whether the Fed should act in October or wait until December for more economic data.
The problem is that US inflation is picking up again.
September’s Consumer Price Index (CPI) rose 3.7% year over year, partly because of higher energy costs. Consumer inflation has also remained above the Fed’s 2% target for one of the longest stretches on record.
On the other hand, the Producer Price Index (PPI), which gauges inflation at the wholesale level, increased by 6.3% year-over-year in September. This marked the largest increase in one year since 2022.
At the moment, traders anticipate the Fed to keep interest rates steady in October before increasing them in December.
What to Know
The Fed has kept rates steady despite persistent inflation, while Wall Street moves higher and investors look to Kevin Warsh for clues about December’s decision.
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