Fed announces decision to hold benchmark rate at 3.75–4.00%

Federal Reserve Chair Kevin Warsh said at a press conference immediately after the meeting that he does not support signaling policy decisions in advance or prejudging meetings. He said lowering inflation is the Fed's responsibility and explained that discussions over the past two days had focused primarily on price stability. Citing renewed increases in energy and related prices in recent weeks, he emphasized that the Fed's task is to prevent relative price changes in some sectors from spreading across the economy.

The U.S. Federal Reserve (Fed) held its annual policy rate at 3.75–4.00% at its regular Federal Open Market Committee (FOMC) meeting on the 28th, local time. It kept rates unchanged after raising them last month for the first time in three years and two months, and provided no clear signal about a December rate increase.

The rate hold was announced less than a week before the U.S. midterm elections on November 3. Asked whether the midterm elections had influenced the decision to hold rates, Chair Warsh replied that politics had played no role in the decision.

Kiwoom Securities issued a report on the 29th forecasting a strong likelihood that the Fed would raise its policy rate by another 25bp in December (1bp equals 0.01 percentage points). It assessed the October hold following September's 25bp increase as a cautious response intended to examine economic data and the effects of existing tightening, and to review changes in economic and financial conditions before another increase.

The Fed kept its policy rate at 3.75–4.00% per year at the October FOMC meeting held on the 28th, local time. Two of the 12 members opposed the hold, arguing for a further increase.

Kiwoom Securities analyst Kim Yu-mi said high international oil prices and rising energy prices could push US headline consumer price inflation higher again from the end of the year into early next year. Kim explained that, with consumption and investment remaining robust, the case for further tightening to achieve the price stability target could strengthen if energy price increases spread to other goods and services.

Kim explained that the emphasis on examining additional economic data suggested the possibility of maintaining the tightening stance while assessing the effects of existing policy and moderating the pace, rather than raising rates aggressively. Kim also interpreted the move to reduce some regular opportunities for rate decisions as an intention to assess economic conditions, inflation trends and financial market conditions comprehensively.