Fed holds rates steady in 10-2 split as Warsh denies political influence

The Federal Reserve held interest rates steady on Wednesday, keeping the benchmark in the 3.75% to 4% range, according to the New York Post ^[1]. Despite worsening inflation data, the central bank chose to pause, a decision that sparked a rare 10-2 split among governors.

Fed Chair Kevin Warsh told reporters that politics played no role in the decision, stating, “I didn’t hear an utterance about politics,” according to the Guardian ^[2]. This pause comes just days before the midterm elections, where affordability is a top issue for voters. However, Warsh acknowledged the meeting was a “heck of a family fight,” noting that two governors, Lisa Cook and Beth Hammack, dissented in favor of an immediate quarter-point hike, as reported by the New York Post ^[1].

The decision follows a September rate hike, the first since 2023, driven by rising inflation. Recent data shows the Consumer Price Index rose 3.7% over the last 12 months through September, while the Producer Price Index jumped 6.3%, according to the New York Post ^[1]. The Guardian reported that oil prices soared above $117 a barrel due to the closure of the Strait of Hormuz amid the war with Iran, fueling these costs ^[2].

President Donald Trump has repeatedly criticized the Fed, arguing rates should be 1% or less, according to the Guardian ^[2]. CBS News reported that robust economic expansion and consistent household spending are also pushing prices higher, making it harder for the Fed to control inflation ^[4]. Analysts note that while the Fed is holding now, many economists expect another hike in December, which could raise borrowing costs for mortgages and credit cards before the holidays.

Warsh emphasized that the Fed remains focused on price stability and that upcoming information will guide future policy. He also announced that starting in fall 2027, the number of annual meetings dedicated to setting rates will decrease from eight to seven, and to six by 2028, according to the Guardian ^[2]. Investors are now betting on a December increase, despite the current hold, as the New York Post noted that traders feared acting too close to the midterms could appear politicized ^[1].