Fed Holds Rates in 9-3 Vote
By Jacqueline Policastro | Quincy News Correspondent
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Washington (Quincy News) — The Federal Reserve left interest rates unchanged Wednesday, with Chair Kevin Warsh using his second post-meeting news conference to address growing impatience over inflation, insisting the central bank is moving even when its benchmark rate is not.
The Federal Open Market Committee voted 9-3 to maintain the federal funds rate target range at 3.5% to 3.75%. Cleveland Fed President Beth Hammack, Minneapolis Fed President Neel Kashkari and Dallas Fed President Lorie Logan dissented, preferring a quarter-point increase. The previous meeting under Warsh ended in a unanimous vote to hold rates steady.
The federal funds rate does not directly set mortgage or credit card rates, but it influences borrowing costs across the economy.
Warsh acknowledged that households and businesses are impatient after more than five years of above-target inflation. But he warned that the problem cannot be corrected in a matter of weeks.
“We’ve got no magic wand,” Warsh said. Later, when asked what Wednesday’s news meant for the average household, he offered a more direct assurance: “The Fed’s on the case.”
The FOMC’s statement said economic activity continues to expand at a solid pace, productivity and capital investment remain strong, and job gains have kept pace with growth in the workforce. It also said inflation remains elevated relative to the central bank’s 2% target, in part because of supply shocks affecting energy and other sectors.
Despite the three dissents, Warsh resisted describing the Fed as divided. He characterized the two-day meeting as a “good family fight” and said policymakers had substantial agreement despite differing over Wednesday’s decision.
“There was a disagreement about a decision today,” Warsh said, arguing that the vote did not capture the full scope of the discussion. He described the current posture as “watchful thinking, not watchful waiting.”
Warsh gave no indication of what the Fed might do in September. Instead, he pointed to materially higher Treasury yields since the Fed’s last meeting, noting that market rates had moved even though the committee had not changed its policy rate.
Markets closed lower following the Fed’s decision, with the Dow falling 2.2%, the S&P 500 down 1.5% and the Nasdaq losing 1.7%. By Wednesday afternoon, CME FedWatch showed futures markets pricing in roughly a 60% probability of a quarter-point rate hike at the Fed’s September meeting.
Warsh said the Fed will continue to limit forward guidance, favoring shorter policy statements and fewer signals about future rate moves to get a more “direct and unfiltered” read from markets. He added that the Fed will continue holding post-meeting news conferences through the end of the year.
The FOMC’s next policy meeting is scheduled for September 15-16.
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