Cook and Hammack dissent for a hike as the Fed holds at 3.75% to 4% and Warsh plans fewer meetings

The Federal Reserve held its target range for the federal funds rate at 3.75% to 4% on Wednesday^13,30. The vote was 10-2²⁴. Governor Lisa Cook and Cleveland Fed President Beth Hammack dissented in favour of raising rates by 0.25 percentage point^4,26.

It was Cook’s first dissent on a central bank decision, and she is currently targeted by President Donald Trump for removal³. A governor and a regional president dissented together for the first time since 1992²³. Warsh said he would not take part in the White House hearing on the effort to fire Cook, answering “Not to my knowledge” when asked whether he or the Fed would have any role³².

The Fed said it was awaiting the “accumulation of more information”³, and the pause gives it time for more information²⁰. Markets had widely expected the hold². Vice Chair Philip Jefferson had pointed to a sharp rise in longer-term borrowing costs before the meeting³⁴.

Why it matters to investors

The Fed kept rates steady despite mounting inflationary pressures⁸. Warsh said inflation remains elevated after a recent pickup³⁰, but he also said the US economy is not running too hot despite some demand pressures¹¹. He said third-quarter GDP growth is above three percent³³.

Warsh declined to preview the next move¹². “I don’t believe in forward guidance absent a crisis,” he said when asked about a December hike¹². He wants to stop previewing coming moves, while several colleagues say the central bank still owes the public an explanation of how it will respond to the economy²². Officials are not aligned on how much weight to give financial conditions, with New York Fed President John Williams more focused on economic data³⁸. A December hike remains widely expected², and bond traders put the chance of one at 90% after the hold²⁸.

Warsh also said the Fed will phase in an adjusted meeting schedule as of next fall¹⁴. The Fed plans to eliminate some rate-setting meetings, a change that would make it unique among Western central banks²⁵. One account put the cut at eight decisions a year to six in 2028²⁷.

What to watch

The balance sheet is the next item¹⁵. Warsh said the policy committee will weigh balance sheet issues early next year, with a task force studying an overhaul of the system¹⁵. He has long said the Fed should hold fewer assets¹⁶, and its balance sheet has not grown since mid-August¹⁷.

He played down expectations of an early preview of the task force’s findings¹⁸. “If we decide to make balance sheet changes, it is unlikely to have any effect on this policy juncture,” Warsh said¹⁹. The Fed made no change to the runoff of its securities holdings and gave no hint of slowing it³⁷.

Gold slipped after Warsh questioned tight policy and defended the 2% inflation target³¹.