Futures pricing for a December rate increase kept the Federal Reserve’s next move in focus for the dollar after two officials dissented Wednesday from its decision to hold rates steady.
At its Oct. 28 meeting, the Federal Open Market Committee (FOMC) voted 10-2 to keep the federal funds target range at 3.75% to 4.00%. Fed Governor Lisa D. Cook and Cleveland Fed President Beth M. Hammack favored a 25-basis-point increase. The committee’s previous decision, on Sept. 16, raised rates by the same amount in a unanimous 12-0 vote.
Before the announcement, Brown Brothers Harriman analyst Elias Haddad had forecast a 9-3 hold vote, with Hammack and two other officials favoring an increase, FXStreet reported. The actual vote paired Hammack with Cook; the other two officials Haddad had expected to dissent voted to hold.
Consumer prices rose 3.7% in the 12 months through September, compared with 3.4% through August, the Bureau of Labor Statistics said. In its statement, the Fed described economic activity as expanding strongly and domestic spending as resilient, while saying price pressures remained high. It said future policy would depend on incoming information and remain aimed at bringing inflation back to 2%, without naming a specific December action.
The Associated Press reported that futures markets reflected investor expectations for a rate increase at the December meeting. That pricing is a market expectation, not a Fed commitment. Haddad’s assessment, as reported by FXStreet, was that durable economic activity and continued price increases strengthened the case for a hawkish Fed stance, which he said could support the dollar. EconoTimes previously reported on a forecast for a Fed pause before a December rate increase.
The Associated Press also reported that higher interest rates can increase borrowing costs for people with mortgages, auto loans and credit cards. The FOMC’s next meeting is scheduled for Dec. 8-9.
