Updated

Updated · Yahoo Finance · Oct 28

Federal Reserve Opens 2-Day Meeting as Traders See Under 10% Odds of October Rate Hike

Updated

Updated · Yahoo Finance · Oct 28

Federal Reserve Opens 2-Day Meeting as Traders See Under 10% Odds of October Rate Hike

Q: Is this week's expected Fed pause a sign of caution, or a warning that inflation is still too strong?

It is both, but more immediately it is a sign of caution rather than relief. The Fed is expected to pause not because inflation is under control, but because officials want one more round of data before deciding whether to tighten again. The inflation backdrop still looks uncomfortable. Recent CPI and PCE readings remain above the Fed’s 2% target, with August PCE at 3.4% and core PCE at 3.0%, and policymakers have repeatedly said price pressures are still broad-based. September minutes and recent remarks from officials such as Christopher Waller and Beth Hammack show that many at the Fed still see upside inflation risks and think another increase this year may be appropriate. At the same time, the case for waiting is real. The Fed already raised rates in September to 3.75%–4.00%, long-term yields have climbed, mortgage rates are elevated, and officials want to assess whether tighter financial conditions are doing some of the work for them. The next inflation report arrives after this meeting, so holding steady now preserves flexibility. That is why economists describe this meeting as a likely “hawkish hold.” A pause would not mean the Fed thinks inflation is beaten. It would mean policymakers believe policy is already restrictive enough to justify waiting briefly, while keeping pressure on markets to expect further action if inflation does not cool. So the pause is best read as caution under persistent inflation pressure: no immediate hike, but also no all-clear.

3 articles · Updated · Yahoo Finance · Oct 28

The Fed began its two-day policy meeting Tuesday with benchmark rates expected to stay at 3.75% to 4% when the decision is released Wednesday.
CME pricing shows less than a 10% chance of an October hike, even after hotter-than-expected inflation, as officials appear inclined to wait for more data.
Kevin Warsh's 2:30 p.m. ET press conference is now the main focus, with economists looking for a hawkish hold that signals another increase could still come in December.
Fed officials remain split between waiting and tightening now, while the meeting's timing just days before US midterm elections adds pressure to avoid a surprise move.
Markets have largely priced in no change this week, leaving the broader question whether the Fed uses guidance to prepare investors for year-end tightening.