The Federal Reserve holds rates steady as expected, with divisions resurfacing but fewer hawkish voices; Cook and two other voting members support a rate hike.

The Federal Reserve, as the market expected, kept rates unchanged, but internal disagreements were exposed: this rate decision did not receive unanimous support from voting members of the monetary policy committee.

On Wednesday, October 28th, Eastern Time, the Federal Reserve announced that the FOMC decided to keep the target range for the federal funds rate unchanged at 3.75% to 4.00%. This means that, after the rate hike in September—its first in three years—the Fed is pausing its actions. However, this does not mean there will be no more rate hikes this year.

The updated dot plot released at the September meeting shows that most Fed policymakers expect another rate hike by the end of the year. Furthermore, the statement for this decision reveals that two voting members supported a rate hike at this meeting, continuing to defy repeated calls from President Trump for the Fed to cut rates. Interestingly, among the dissenters is Fed Governor Cook, whom Trump recently sought to remove from office.

This rate decision was entirely within Wall Street’s expectations. As of Tuesday’s close, CME tools showed that the federal funds rate futures market priced in a nearly 91% probability that the Fed would keep rates unchanged this week, and more than 82% probability of at least a 25 basis points hike at the next meeting in December.

Nick Timiraos, a reporter known as the “new Fedwire,” pointed out that Fed officials had previously hinted at a possible rate hike in December. By keeping rates unchanged this time, the Fed aims to buy time to assess whether further hikes are needed to prevent broader inflationary impacts from rising energy costs and AI infrastructure boom.

Fed's Hawkish Disagreements Narrow Compared to July, Cook 'Gives the Finger' to Trump

Compared with the last statement released in mid-September, the biggest difference in this meeting’s statement lies in the rate decision. Last time, all 12 FOMC voting members supported a 25 basis point rate hike; this time, the FOMC decided to keep rates unchanged, but two of the 12 voting members opposed the decision, with the remaining ten in support.

From the voting results, this is the second time under Chair Walsh that an FOMC decision was not unanimously agreed upon by voting members. The last occurrence was at the end-July meeting, when three regional Fed presidents opposed holding rates, all supporting a 25 basis point hike. That was the first time since 2016 that three voting members issued dissenting votes on policy changes from the same stance.

This time, the number of dissenters was lower than last time. According to the statement, the opposing votes came from Governor Cook and Cleveland Fed President Beth Hammack.

It’s noteworthy that Hammack also cast a dissenting vote in July for supporting a rate hike. However, the other two dissenters in July—Minneapolis Fed President Neel Kashkari and Dallas Fed President Lorie K. Logan—returned to the mainstream pause camp this time. From this perspective, internal hawkish disagreements at the Fed have narrowed compared to July.

Some commentators say that Cook’s dissent was essentially a way of “giving the finger” to President Trump, who has been forcefully advocating for rate cuts.

Wallstreet News previously mentioned that in June this year, the US Supreme Court ruled that Trump could not remove Cook without giving her a chance to fully defend herself, but it did not ultimately determine whether the allegations were substantiated. This month, Trump again pushed to remove Cook from her position as governor.

On October 9th, the White House announced the formation of a special investigation committee to probe allegations that Cook made false statements in mortgage-related documents and scheduled a related hearing at the White House for November 5th. At the time, Trump stated in a White House memo that, as president, it is his responsibility to ensure the faithful execution of the law, and that the committee would review evidence and accusations against Cook to determine whether there were grounds for removal.

Economic Expansion Upgraded from 'Steady' to 'Strong'; Accumulation of New Information Helps Ensure Inflation Meets Target Promptly

Regarding the economy, this meeting’s statement largely repeats the wording from the previous one, with only one difference: previously, US economic growth was described as “steady”; this time, it is upgraded to “strong.”

The statement continues to emphasize the Fed’s commitment to price stability and reiterates: job growth is in step with labor force growth, the unemployment rate remains basically unchanged, and it repeats the previous remark that “productivity growth is strong and capital investment momentum is solid.”

As before, the statement notes uncertainties facing the economy: “While uncertainty remains elevated, partly due to developments in the geopolitical landscape, domestic spending shows resilience.”

The Fed also reaffirms its policy of maintaining ample reserves in the banking system.

The statement again stresses that “inflation remains elevated,” but immediately after, adjusts its language regarding rate action. Last time, it said a rate hike “will help bring inflation back to the Committee’s 2% target more promptly.” This time, that sentence is deleted, and the following line is added:

“The accumulation of additional information will help the Committee to determine an appropriate policy stance in order to ensure inflation returns promptly to the Committee’s 2% target.”

The red text below shows the deletions and additions in this decision statement compared to the last one.