The Fed held interest rates at 3.75–4.00%, as expected. The vote was 10–2, with Lisa Cook and Beth Hammack both favouring another quarter-point hike. That keeps pressure for further tightening alive. It does not settle December. FOMC statement
The press conference gave traders more to work with. Kevin Warsh said September’s hike was starting to work and declined to commit to the next move. The dollar weakened as he spoke. My read is that USD bulls needed a stronger reason to expect another hike soon.
What changed from September
| Area | Previous meeting — 16 September | Latest meeting — 28 October |
|---|---|---|
| Actions | Unanimous 25bp hike to 3.75–4.00%. | Expected hold; two members wanted another 25bp. |
| Forward guidance | The hike aimed to bring inflation back to target sooner. | Wait for more evidence; December remains open. |
| Tone | Acting against persistent inflation. | Firm on inflation, patient about the next move. |
| Wording | Growth described as “solid”. | Growth upgraded to “strong”; more information needed to judge policy. |
| Risks | Elevated inflation and geopolitical uncertainty. | Inflation risk persists while September’s tightening works through the economy. |
| Data focus | Inflation, spending and a broadly stable labour market. | Those indicators, plus productivity, inflation expectations and borrowing conditions. |
The comparison is with the 16 September decision. Reserve-management policy continued unchanged. There were no new economic forecasts or dot plot, the chart of officials’ rate projections. The next scheduled projection update is in December.
Why the Fed chose to wait
Warsh’s argument was that September’s hike is beginning to affect financial conditions—the cost and availability of borrowing. The majority wanted more time to assess that effect before adding another increase.
He also pointed to stronger productivity. If businesses can produce more with the same resources, the economy can grow faster without creating the same inflation pressure. Strong growth alone therefore does not settle the rate decision.
The important qualification is that Warsh would not describe financial conditions as tight. Borrowing can become more expensive while still allowing spending and investment to grow strongly. The Fed sees progress, but has not declared that enough restraint is in place.
That leaves a clear test for December: is inflation moving convincingly towards 2%, and is the September hike applying enough pressure? Persistent inflation or easier borrowing conditions would strengthen the case for another increase. Neither makes it automatic.
What it means for the dollar
The initial dollar dip after the statement quickly reversed as Iran-related headlines hit markets. Selling resumed during the press conference, leaving USD among the weakest currencies over recent hours. AUD and GBP held up better, although the dollar still retained part of its weekly advance.
For now, I lean softer on USD in the near term. Warsh gave markets room to question the urgency of another hike. I would want that weakness backed by falling US rate expectations relative to other economies before treating it as a lasting shift. The currency reaction alone does not establish that change.
What Invalidates This Thesis
Persistent inflation, resilient demand and renewed upward pressure on US rate expectations relative to peers would undermine the softer-dollar view. A geopolitical shock could also revive dollar demand independently of the Fed.