The Fed kept rates unchanged today, holding at 3.75% to 4.00% after raising rates 25 basis points in September. The statement leaned toward the "we might not be done" side.
What the Fed did
Rates: Held at 3.75% to 4.00%, after September’s 25-basis-point hike.
The vote: 10 to 2, compared with a unanimous 12 to 0 in September.
The dissenters: Lisa Cook and Beth Hammack both wanted another 25-basis-point hike.
What changed in the language
The Fed moved from describing economic activity as growing at a “solid pace” to a “strong pace.”
Inflation is still a problem. It’s described as "elevated," with no sign the Fed sees any improvement.
The tone on policy shifted.
In September, the Fed said the hike would support a timelier return to 2% inflation.
In October, the emphasis was on needing more information to decide what policy is appropriate.
The economy it’s describing
The picture the Fed painted is a sturdy one:
Labor market: Unchanged. Job gains are keeping pace with workforce growth, and unemployment is holding steady.
Consumers: Spending remains resilient.
Productivity and investment: Both remain strong.
Currently, the economy can handle higher rates, which is part of why two members wanted to push further.
When the economy is strong and inflation is still elevated, the Fed has little reason to cut and some reason to hike.