Fed holds rates at 3.75-4% with two dissents for a hike, Wall Street ends higher

A hold with two votes for a hike

The Federal Open Market Committee (FOMC) kept its benchmark rate in a range of 3.75-4% on Wednesday, 28 October, the level in place since September, when the Fed raised rates by 25 basis points. The decision passed 10 to 2. Lisa Cook, a Fed governor, and Beth Hammack, president of the Cleveland Fed, wanted a further 25 basis point increase. Markets had priced the chance of a hike below 10%, so the outcome matched most expectations. The statement described economic activity as expanding at a strong pace, a slight upgrade from the September assessment.

Hold rates10

Raise by 25 basis points2

Hold rates

10 votes

Raise by 25 basis points

2 votes

Data from the article text

Inflation still above target

Inflation has run above the Fed's 2% target for more than five years. The consumer price index reached 3.7% for September, up 0.3 percentage points from a month earlier. Core inflation, which excludes food and energy, was 2.6%, up 0.2 points. The Fed's preferred gauge also stayed above 3% for September even after removing food and energy prices. Part of the concern is that price pressure has spread beyond the energy sector, with the war in Iran adding uncertainty. The Atlanta Fed's GDPNow tool estimated third-quarter US growth at 3.4% annualized.

Consumer price index3.7%

Core inflation (excl. food and energy)2.6%

Consumer price index

3.7 %

Core inflation (excl. food and energy)

2.6 %

Data from the article text

Warsh, Cook and the December outlook

Fed Chair Kevin Warsh told the press conference that keeping prices stable and bringing inflation down is the central bank's main priority. Asked why it had not raised rates again after September, he did not answer directly, though he agreed the Fed has not yet achieved price stability. He said the committee would have more information at its December meeting and declined to signal future moves. He also announced a change to how FOMC meetings will run in 2027. President Donald Trump, who chose Warsh, believes rates are too high despite the inflation data. Trump tried to remove Cook over allegations about information she gave in mortgage applications. The Supreme Court blocked that effort, the administration renewed it, and a hearing is set for early November. Futures contracts point to a high likelihood of another hike in December and possibly one or two more in 2027.

Markets, oil and gold

The Dow rose 0.19% to 52,475.10, the S&P 500 gained 0.28% to 7,743.98, and the Nasdaq added 0.27% to 26,549.85. The two-year Treasury yield climbed 4.0 basis points to 4.785%, hitting a daily high after the vote became known. Brent crude traded at about $115 a barrel and rose more than 1% after an attack on a refinery in Saudi Arabia, the world's largest oil exporter. Gold fell on Wednesday. Hamad Hussain, an economist at Capital Economics, said higher oil prices and the risk of a more hawkish Fed than markets expect were weighing on gold.

Alphabet's quarterly miss

Alphabet reported profit of 26.17 billion dollars, down from 34.97 billion a year earlier, and earnings per share of 2.12 dollars against 2.87. Revenue rose 25% year on year to 127.57 billion dollars, slightly below the 128.22 billion analysts expected. Search revenue came in at 63.35 billion against a forecast of 64.96 billion. Capital expenditure reached 51.4 billion dollars, leaving free cash flow negative at 9.1 billion against an expected positive 2.7 billion. Alphabet said its Gemini app reached one billion users, the fastest-growing product in its history, but that did not lift the stock. CNBC reported an initial drop of more than 9% in the shares, while Nasdaq closing data showed a 1.3% gain.

Total revenue, reported127.57

Total revenue, forecast128.22

Search revenue, reported63.35

Search revenue, forecast64.96

Total revenue, reported

127.57 bn USD

Total revenue, forecast

128.22 bn USD

Search revenue, reported

63.35 bn USD

Search revenue, forecast

64.96 bn USD

Data from the article text