Fed holds rates steady, but two regional presidents back more hikes soon

what happened

The Federal Reserve kept its interest rate unchanged, with the committee voting 10 to 2. Dallas Fed President Lorie Logan said that rates need to rise by at least 50 basis points, or two quarter-point moves, to bring inflation back to the 2% target. She added that the Fed could pause afterward to reassess the outlook.

St. Louis Fed President Roberto Musalem also backed continued tightening, saying additional firming will be necessary, and soon. Richmond Fed President Tom Barkin did not explicitly endorse more hikes, but said that a continued surge in demand tied to artificial-intelligence spending could call for leaning against it.

According to Dow Jones Newswires, citing MarketWatch, the Fed raised rates by a quarter point in September to a range of 3.75-4%, its first hike in three years. The next meeting is set for December 8-9.

why it matters

Hawkish comments from regional presidents raise the odds of another hike at the December meeting, which pressures bonds and supports the dollar. Chair Kevin Warsh has offered little guidance, so markets will look to other officials for signals.

market impact

US dollar and Treasuries: expectations of more hikes support the dollar and weigh on bond prices

• ▲US dollar pressure up — expectations of further rate hikes raise yields on dollar assets
• ▼US Treasuries pressure down — expectations of a higher policy rate push long-term bond prices lower
• ▼Gold pressure down — higher yields and a stronger dollar usually weigh on gold

tags

instruments