Fed holds rates at 3.75%-4% as two officials push for a hike; Warsh trims 2027 rate meetings

The Federal Reserve kept its benchmark interest rate unchanged Wednesday, holding the federal funds target range at 3.75% to 4% in a 10-2 vote. The two dissenters, Lisa Cook and Beth Hammack, wanted a quarter-point increase, according to the Fed’s statement.

The decision was widely expected. The Fed raised rates by a quarter point in September for the first time in three years, the AP reported, defying President Donald Trump’s calls for cuts, and has held since.

What did the Fed say about inflation?

“Inflation remains elevated,” the statement said. “The accumulation of more information will help the Committee determine the policy stance appropriate to ensure a timely return of inflation to the Committee’s 2 percent goal. The Committee will deliver price stability.”

Reuters, via Investing.com, said the Fed upgraded its view of the economy and hinted that further increases could come depending on inflation. The statement described economic activity as “expanding at a strong pace,” with resilient spending, strong productivity and an unemployment rate that “has changed little.”

What did Kevin Warsh say?

At his news conference, Chair Kevin Warsh said growth has strengthened, with third-quarter growth likely running above 3%, while Americans are “still dealing with inflation that has been running above the Committee’s objective for close to 6 years.” He said financial conditions had tightened for some businesses and households since September, but added, “I’m unwilling and unable to call them tight.”

Is the Fed changing its meeting schedule?

Yes. Warsh said the Fed will keep eight meetings a year, but in 2027 one will focus “exclusively on broad monetary policy strategy, with neither a vote on the federal funds rate nor a policy statement anticipated.” He said he expects two strategy meetings and six policy meetings in 2028, which means fewer chances to change rates each year.

What does the Fed decision mean for mortgage rates?

The Fed does not set mortgage rates directly, but its policy rate influences borrowing costs across the economy. With the benchmark range unchanged, Wednesday’s decision did not by itself lower borrowing costs, and the two dissents for a hike suggest some officials see more tightening ahead. Mortgage rates also depend on longer-term bond yields, which move with inflation expectations.

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