Fed Pauses, Keeping Rates at 3.75%–4.00% as Two Officials Dissent for Hike

The Federal Reserve left its benchmark interest rate unchanged on Oct. 28, holding the federal funds target range at 3.75% to 4.00%, but the decision exposed a clear split inside the central bank as two policymakers favored another rate increase.

The Federal Open Market Committee, the Fed’s policy-setting body, voted 10-2 to stand pat. Dissenting were Lisa D. Cook, a member of the Board of Governors, and Beth M. Hammack, president and CEO of the Federal Reserve Bank of Cleveland. The Fed said, “Voting against the monetary policy action were Lisa D. Cook and Beth M. Hammack, who preferred to raise the target range for the federal funds rate by 1/4 percentage point at this meeting.”

The decision amounted to a pause, not a retreat. Just six weeks earlier, on Sept. 16, the Fed had unanimously raised rates by a quarter-point to the current 3.75% to 4.00% range. That made October’s move a hold after a recent hike, underscoring that officials were pausing to assess incoming data rather than signaling any shift toward rate cuts.

In its statement, the Fed said, “The Committee decided to maintain the target range for the federal funds rate at 3-3/4 to 4 percent, in support of the Federal Reserve's dual mandate.” That dual mandate is to promote stable prices and maximum employment. The statement also captured the tension facing policymakers: “Economic activity is expanding at a strong pace.” At the same time, “Inflation remains elevated.” The Fed added, “The accumulation of more information will help the Committee determine the policy stance appropriate to ensure a timely return of inflation to the Committee's 2 percent goal.”

That balancing act reflects the latest economic data. The Fed’s preferred inflation gauge, the personal consumption expenditures price index, showed headline inflation running at 3.6% in September from a year earlier, while core PCE, which excludes volatile food and energy prices, was 3.1%. Both remained above the Fed’s 2% target. Meanwhile, the unemployment rate was 4.2% in September, a sign the labor market had stayed relatively firm even as borrowing costs rose.

Fed Chair Kevin M. Warsh struck a hawkish tone in his post-meeting news conference, saying, “The Committee will deliver price stability.” Investors appeared to take the hold as a live pause rather than the end of tightening. After the statement and press conference, market-based expectations for a rate increase at the Fed’s next meeting moved higher, with futures pricing implying roughly a 70% to 85% chance of a December hike, depending on the snapshot. The next scheduled FOMC meeting is Dec. 8-9.

The two dissents also drew notice because that pairing is unusual: several major news outlets, citing Fed voting history, said it was the first time since 1992 that a member of the Board of Governors and a regional Fed bank president had dissented together on the same side. Still, the larger message from the meeting was less about Fed history than about an unresolved policy debate over how much restraint is still needed to bring inflation down.

Warsh also used the meeting to announce a procedural change. Beginning in 2027, one of the Fed’s eight scheduled meetings each year will be set aside for broad monetary policy strategy, with no expected vote on the federal funds rate and no policy statement. He said he expects the Fed to hold two such strategy meetings in 2028, marking a concrete institutional change even as the immediate focus remains on inflation and the December decision.