The decision came ahead of US midterm elections next week.
Economic activity is expanding at a strong pace. While uncertainty remains elevated owing, in part, to geopolitical developments, domestic spending has been resilient. Productivity growth is strong, and capital investment is robust. Job gains have kept pace with the workforce, and the unemployment rate has changed little, the Committee said in a statement.
Inflation remains elevated. 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. The Committee will deliver price stability, it added.
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 GDP increase in the first half of this year was revised up from an earlier estimate of 1.8 percent up to 2.4 percent. And the third quarter appears to have brought an even more rapid advance, led by healthy consumer spending, likely running above 3 percent growth, and business investment, likely rising at about a double-digit pace,” Fed Chairman Kevin Warsh said at the press conference.
The jobless rate is lower than a year ago, and payroll growth is noticeably above last year’s pace. The four-week moving average of unemployment insurance claims continues to run at the lowest level in generations. So on the employment side of the Fed’s dual mandate, conditions are quite positive, he said.
“And yet Americans, of course, are still dealing with inflation that has been running above the Committee’s objective for close to 6 years. It’s our responsibility to get inflation down. That’s the reason the FOMC’s discussion over the last couple of days focused mainly on the price stability side of our remit,” Warsh said.
Inflation is too high. Energy and related prices have moved higher again in recent weeks. And our job is to ensure that relative price changes in some sectors do not broaden out across the economy, and that inflation expectations remain as they are anchored, he said.
“The information we receive over the coming period will help us determine where we want policy to be. And at every turn, good or bad, our job is to get monetary policy right. And that’s exactly what we’re doing,” he said.
He also announced change in our FOMC schedule, starting next fall.
“We believe eight meetings per year is the right number for the FOMC. But in 2027, one meeting will focus exclusively on broad monetary policy strategy, with neither a vote on the federal funds rate nor a policy statement anticipated. The rest will be regular FOMC policy-setting meetings. And I expect that in 2028, we’ll have two meetings dedicated to discussions of strategy, and six for setting policy,” Warsh said.
“Getting policy right involves assessing near-term developments at timely, regular, and information-rich intervals. But it’s equally important we reserve time and space, as an intellectually diverse group, for strategic deliberations—for thinking anew about big questions, looking out over longer time horizons, focusing, as I say, on the left side of the decimal point,” he said while explaining the reason for change in the schedule.
It’s an institutional choice, affecting the nature and the quality of our deliberations, and, ultimately, the wisdom of our decisions. It’s yet another change to get the conduct of monetary policy on the right track, Warsh said.
He also said the Fed’s decision has nothing to do with politics. Warsh also reiterated he does not believe in giving forward guidance.
“The economy is pointing in the right direction. Is the economy running too hot? Is the economy running too strong? That isn’t the judgment of most of my colleagues,” Warsh said.
Economic growth is higher, but that doesn’t tell me that economic growth is somehow causing inflation and making our job harder, but we’ll be continuing to look at those issues, he said.
“The goal in my view, and you’ve heard me say this before, isn’t to throw sand in the gears of the economy and throw people out of work. I don’t think we have to do that. The dominant means in which this policy is going to be put into practice is we are tightening financial conditions,” Warsh said.
“They’ve tightened a bit since we met last time. That isn’t something that we’re uncomfortable with. That tells me that policy is working and I think we can do that and make the economy more durable, have it last longer and still achieve stable prices,” he added.