Federal Reserve Holds Rates at 3.75%-4% as Two Officials Favor Increase

The Federal Reserve held interest rates at 3.75%-4% on Oct. 28, with two officials dissenting in favor of a quarter-percentage-point increase. The hold follows September’s quarter-point increase, with officials awaiting further economic information before deciding their next move.

Cook and Hammack Favor Higher Rates

The Federal Open Market Committee approved the hold by a 10-2 vote. Fed Governor Lisa Cook and Cleveland Fed President Beth Hammack preferred raising the target range by 0.25 percentage points, which would have taken it to 4%-4.25%.

The split followed a unanimous decision in September to increase rates by a quarter point. The hold leaves September’s rate increase in place.

Interest rates influence financing costs and returns on cash, factors investors weigh when allocating money to volatile assets such as cryptocurrencies. Those relationships provide context for the decision without establishing a particular crypto-price response.

Fed Describes Strong Growth and Elevated Inflation

The committee described economic activity as expanding at a strong pace, compared with a solid pace in September. It said domestic spending remained resilient, capital investment was robust, and productivity growth was strong. The Fed clears in its Oct. 28 policy statement:

“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”

Officials also said job gains had kept pace with the workforce and unemployment had changed little. Geopolitical developments continued to contribute to elevated uncertainty.

Inflation remained above the Fed’s objective, and the committee said additional information would help determine the policy needed to return it to 2%. Officials gave no timetable for lowering rates, and the statement did not specify a threshold for another increase.

Reserve Operations Support Rate Target

The Fed’s accompanying implementation note directed the New York Fed’s trading desk to conduct operations needed to maintain the target range. The interest rate paid on reserve balances remained at 3.90%, while the primary credit rate remained at 4%.

The instructions also allow purchases of Treasury bills and, if needed, other Treasury securities with remaining maturities of three years or less. These purchases would maintain ample reserves, the balances banks hold at the central bank to support payments and meet liquidity needs.

The reserve-management instructions serve the practical task of implementing monetary policy. They do not announce a reduction in the benchmark rate or establish a new timetable for easing.