Fed Holds Rates in a Hawkish Pause: Why December Hikes Remain on the Table

Interest rates were held unchanged. The target range for the federal funds rate was maintained at 3.75%–4.00% in a 10-to-2 vote.

The key point lies not in the hold itself, but in the nature of the hold.

The two dissenting votes were in favor of a rate hike. Governor Lisa Cook and Cleveland Fed President Beth Hammack dissented, advocating for a 25 bp rate hike. The main point of this decision is that these were hawkish dissents, rather than dissents calling for a rate cut.
Statement Wording: Economic activity was upgraded to expanding at a "strong pace," and inflation was described as "remains elevated." It noted that the accumulation of additional information will determine the future policy path, concluding with the commitment to “achieve price stability.”

Chair Warsh Press Conference: Focused on price stability and reaffirmed a data-dependent stance, emphasizing that they will look closely at further inflation-related data.
December remains on the table. The market has begun pricing in the possibility of a December hike, with discussions even extending to another 25 bp hike in 2026 and further hikes in 2027. The backdrop is that September CPI jumped sharply to 3.7% year-over-year from 2.4% in February.

For reference, this hold is in the nature of a breather following the September rate hike (the first hike since 2023), making it difficult to conclude that the tightening cycle has ended.