Fed split hold: Cook and Hammack dissent for a hike as Warsh waits

The Federal Reserve chose patience on Wednesday, but not unanimously. The Fed split hold left the federal funds target range at 3.75% to 4%, where it has been since September's quarter-point increase, with two policymakers voting to raise rates immediately.

What happened

The statement passed 10-2. Governor Lisa Cook and Cleveland Fed President Beth Hammack wanted a quarter-point hike, according to the Fed's release. CNBC noted it was Cook's first dissent since she joined the Board in 2022, while Lorie Logan and Neel Kashkari, who had sided with Hammack at the July hold, joined the majority this time.

The language moved in a hawkish direction. The committee said activity is "expanding at a strong pace," up from "solid" in September, and that inflation "remains elevated." It added that "the accumulation of more information" will guide its next step and that it "will deliver price stability." Markets had priced less than a 10% chance of a hike before the meeting, according to CME FedWatch data cited by CNBC.

Chairman Kevin Warsh also changed the calendar. In 2027, one of the eight FOMC meetings will focus only on monetary policy strategy, "with neither a vote on the federal funds rate nor a policy statement anticipated," he said, and he expects two strategy meetings and six policy meetings in 2028.

The backdrop is strong growth. The Atlanta Fed's GDPNow tracker points to 3.4% annualized growth in the third quarter, CNBC said, which would be the strongest in a year, and unemployment has stayed low.

Why it matters

For markets, the Fed split hold reads as a pause, not a pivot. "The door remains open to further tightening," said Janus Henderson's Daniel Siluk, quoted by CNBC. Futures still point to a strong chance of another hike in December, the outcome that Warsh had kept on the table in his Bangkok speech and that Christopher Waller also signaled when he backed additional rate hikes. The S&P 500 held its gains after the statement and rose for a third session.

Politics hangs over the timing. Midterm elections take place on Nov. 3, and CNBC noted speculation that officials would avoid tightening so close to the vote. The administration is also pursuing a renewed attempt to remove Cook, with a hearing set for early November.

What's next

The September PCE inflation report, due Thursday, is expected to show the Fed's preferred gauge above 3% even excluding food and energy, CNBC said. The next decision is on Dec. 9. The full text is in the FOMC statement.

The call

We say no FOMC voter will dissent at the December meeting. Polymarket's "Will no one dissent the December Fed decision?" market priced Yes at 62% at 08:19 MSK on Oct. 29. If the Fed hikes in December, the hawks behind this Fed split hold get what they asked for, and a dovish dissent looks less likely. Liquidity in this contract is thin.