US | Fed buys time to assess policy path

The FOMC voted in a split decision (10-2) to keep the fed funds target range unchanged at 3.75–4.00%. We still expect a 25bp hike in December, when incoming data and updated SEP projections will test our baseline of unchanged rates through 2027.

Key points

• Key points:
• The statement upgraded its assessment of economic activity from expanding at a “solid pace” to a “strong pace,” while reiterating that domestic spending has been resilient.
• It included a rationale for today’s pause: the accumulation of more information will help the Committee determine the policy stance appropriate to ensure a timely return to 2%.
• Warsh struck a less hawkish tone than the upbeat assessment of the economy initially suggested; supply-side risks remain central to his concerns.
• His focus is on preventing second-round effects and de-anchoring inflation expectations, rather than responding to still absent broad-based demand pressures.
• December’s SEP should help clarify whether the Fed anticipates tightening into 2027 or considers the next hike sufficient to restore sustained disinflation.

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