The Fed leaves rates unchanged at 3.75%-4% a week ahead of the vote

The Federal Open Market Committee confirmed on October 28 the federal funds rate in the 3.75%-4% range, with an internal vote of 10 to 2. The outcome comes just days before the US midterm elections, set for November 3.

The two dissenting votes came from Governor Lisa Cook and Cleveland Fed President Beth Hammack, both in favor of a 25-basis-point increase. For Cook, this marks her first dissent since joining the Fed in 2022, a sign of internal divisions in reading the data that are more pronounced than in previous meetings.

The statement issued at the end of the meeting indicates that inflation remains above the 2% target and that the Committee is awaiting further data before moving again on monetary policy. The wording leaves open the possibility of future action, without indicating in which direction.

Fed Chair Kevin Warsh addressed the timing of the decision, coming so close to the midterm vote. “Politics played no role in the decision,” he stated, dismissing the idea of electoral influence on the Committee’s choices.

Keeping rates unchanged, despite internal pressure for a hike, leaves the cost of US money in the same range as before the meeting. It remains to be seen whether upcoming inflation data will shift the FOMC majority toward a change of course, or whether the split that emerged at this meeting will recur at subsequent gatherings. Cook’s dissent, in particular, sets a precedent that observers of the US monetary market will watch closely in the coming weeks, against a backdrop in which the balance between fighting inflation and supporting growth remains at the center of the central bank’s internal debate.