US Fed FOMC decision tonight: Hike or no rate increased? What will Kevin Warsh’s next move? Top 3 things to watch
The US Federal Reserve faces a critical debate over how to address an inflation problem that shows no immediate sign of going away, while high borrowing costs are putting pressure on the housing market and the labour market presents its own challenges.
When the rate-setting Federal Open Market Committee (FOMC) announces its decision on Wednesday, markets overwhelmingly expect no change in benchmark interest rates following September’s quarter-percentage-point increase.
Investors will be looking for clues about future policy moves, particularly from Chairman Kevin Warsh.
Recent inflation data has offered little respite from price pressures that intensified earlier this year. The consumer price index (CPI) showed an annual inflation rate of 3.7% in September, driven largely by soaring energy prices.
Core CPI, which excludes volatile food and energy prices, stood at 2.6%, up 0.3 percentage point from August. This remains above the Fed’s 2% inflation target, with the latest reading heading in the wrong direction.
At the same time, the housing market is struggling under the pressure of mortgage rates above 7%. The labour market has settled into a low-fire, low-hire pattern, with layoffs around their lowest levels since the late 1960s, while people out of work struggle to find jobs.
A pause could give policymakers more time to assess the impact of September’s rate increase on the economy and financial conditions. However, signalling tighter policy could put further strain on the housing and labour markets.
Brett Ryan, senior US economist at Deutsche Bank, expects Warsh to signal that further tightening may be needed over time.
The chairman “is likely to signal that recent inflation data reinforce expectations from the September meeting that further tightening will likely be needed over time,” Ryan wrote in a note to clients.
“However, skipping October allows officials more time to assess trends in the data,” he added, as reported by CNBC
Warsh has also shown reluctance to provide forward guidance, seeking to move the central bank away from the practice of explicitly signalling where policy is heading.
1. Kevin Warsh’s signals: Investors will look for clues about future rate moves, even as Warsh remains reluctant to indicate the direction of policy in advance.
2. Inflation data: Whether inflation continues to remain above the Fed’s 2% target will be crucial as policymakers assess the need for further tightening.
3. Housing and labour markets: The Fed must weigh the risks of tighter policy against pressure on housing and employment.
Krishna Guha, head of economics and central bank strategy at Evercore ISI, pointed to the risks facing the Fed.
“It ought to be possible for Warsh – who is alert to market risks even though he professes not to like mollycoddling investors – to show a calming steady hand,” Guha said in a Monday note. “But there is material execution risk.”
The Fed’s lack of detail on how it views the risks to its dual mandate of low inflation and full employment, as well as the pace of monetary tightening, poses substantial challenges.
While inflation data has been hot, the unemployment rate has been fairly steady.
Sanchari Ghosh is an Assistant Editor at Mint with over 12 years of experience in journalism, specialising in personal finance, DLT & DeFi, geopolitics and foreign policy, with a particular emphasis on how these areas intersect. <br> She writes extensively about how money works in everyday life—helping readers navigate personal finance decisions. <br> As AI reshapes investing behaviour, capital is increasingly flowing into decentralized ecosystems, redefining how assets are managed, traded, and valued. She focuses on explaining how money flows within frameworks like Distributed Ledger Technology (DLT), DeFi protocols, and crypto markets—while also exploring what the future of money could look like in a trustless, programmable financial world. <br> She also focuses on immigration-related issues, simplifying complex topics around visas, passports, overseas financial planning, and the many practical challenges Indians face while moving or living abroad. <br> Alongside personal finance, Sanchari has a strong understanding of international politics, contemporary and historical conflicts, and global state decisions. She closely tracks how geopolitical developments influence economies, markets, and individual financial choices, bringing together finance and global affairs in her reporting. <br> She began her career as a desk editor, which gave her a strong foundation in news writing. Over time, her interest naturally shifted toward personal finance. Before joining Mint in 2020, she worked DNA, The Times of India, Outlook Money, BloombergQuint, and ETMoney. At Mint, she got an opportunity to expand her coverage to include immigration and geopolitical developments while continuing to closely follow personal finance trends and market movements.As a journalist, she is committed to accuracy, intellectual rigour, and fairness. <br> She is an English Major and her work took her across cities including Delhi, Mumbai, and Pune. Living independently from an early age gave her firsthand experience in managing life and money on her own. This practical exposure sparked her strong interest in personal finance. <br> Outside the newsroom, Sanchari is a sports enthusiast who regularly plays lawn tennis and squash. In her younger years, she was also a national-level badminton player.
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