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Fed holds at 3.75-4.00% with two dissents for a hike

The FOMC left the policy rate at 3.75%-4.00% on October 28, a 10-2 vote, with Governor Lisa Cook and Cleveland's Beth Hammack both dissenting in favour of a 25bp increase. Cook's vote was flagged as a surprise. The statement said inflation remains elevated and that "the accumulation of more information will help the committee determine the policy stance appropriate to ensure a timely return of inflation to the committee's 2% goal." So this was a hold with the hiking door left open, not a pause with a dovish tilt.

Warsh press conference, the substance

Warsh's line was that economic activity is pointing in the right direction but inflation is too high, that the Fed's responsibility is to get it down, and that there is "no soft inflation target; there is no implicit target; there is only price stability." He acknowledged much of the inflation is energy-related and driven by geopolitical factors, said the Fed is not tolerating an inflation target above 2%, and said politics, including the midterms, played no role in the decision. A separate headline has him saying the economy is not running too hot. On the balance sheet, which Reuters covered in full, Warsh said the task force studying how the Fed uses its bond, cash and other holdings is "working away and comparing their best thoughts" and will likely feed recommendations into the FOMC early in the first quarter, though he called it unlikely to have any material effect on policymaking right now. Context from that piece: holdings went from under $1 trillion pre-2008 to roughly $9 trillion by summer 2022 and are now around $6.8 trillion via runoff, with the Fed finding it cannot shrink much further without money market volatility. Warsh, a long-standing critic of large-scale asset purchases, believes they distort markets, a view others inside and outside the Fed dispute. Further reduction would need changes to the short-rate toolkit and regulatory changes letting banks hold less emergency cash.

Calendar overhaul announced for 2027-28

Warsh also announced a change to the meeting structure. Eight meetings remain the right number per year, but starting next fall one 2027 meeting will have no vote on the policy rate and no statement, focusing instead on strategy. In 2028 two of the eight will be strategy meetings, leaving six policy-setting meetings. Timiraos noted those strategy meetings will not be "live."

Street now leaning toward a December hike

A cluster of sell-side calls points the same direction. Goldman Sachs Asset Management's fixed-income CIO Kay Haigh expects the Fed to resume hiking in December. Gundlach's base case is also a December hike. UBS sees two more hikes by mid-2027 while still looking for the S&P 500 at 8,400 by June, and noted Kalshi had priced a 95% chance of no change today. Cutting the other way, Goldman strategist Vickie Chang expects only one more hike against three priced by markets, which would make this one of the smallest tightening cycles since 1983. Fitch separately warned that global credit risk is deteriorating into 2027 on AI investment uncertainty, high energy prices and tighter financing. Bessent's comment that the Fed is "very attentive to being above the inflation target for a long time" fits the same hawkish backdrop.

Market reaction: yields up, equities barely moved

The 10-year yield was last up 4.11bp at 5.034%, near one-week highs, and short-term rate futures rose after the decision. Equities finished close to flat: Investing.com's quote panel during the session showed the Dow +0.19%, S&P 500 +0.28%, Nasdaq +0.27%, VIX down 3.6% at 16.89, the dollar index roughly unchanged at 101.98 and the 10s-2s spread widening 4.15bp to 31.32. Headlines describe stocks as little changed after a divided Fed, with the Nasdaq and small caps weaker. The dollar had posted a two-week high into the meeting on expectations of hawkish commentary.

Gold round-trips the decision

Kitco had spot gold at $4,039.15, down 0.52%, and at $4,035 right after the 10-2 hold. A TradingView piece walks through the rest: the decision-hour candle ran up to 4,067.7 then down to 4,024.7, closing at 4,033; the press-conference hour closed at 4,075.2, above the 4,060 level that had capped the prior lower-high sequence; the following hour reached 4,082.8 before settling back around 4,069, inside the 4,066-4,074 band that has rejected gold before. The author's framing is that 4,028 has now held three times on a closing basis. Elsewhere, Sucden Financial sees gold at $3,900 and silver at $50 by year-end on Fed tightening, while State Street's Doshi still sees a path to $5,000 despite building downside risk.

Bank of Canada hikes, RBNZ next

The BoC raised its policy rate to 2.50% from 2.25%, in line with consensus, and said another hike is possible. It lifted 2026 GDP growth to 1.0% from 0.7% and 2027 to 2.0% from 1.8%, with inflation forecasts raised more sharply to 2.9% for 2026 and 3.1% for 2027, up from 2.5%. The RBNZ decision is on the calendar with consensus at 3.00% against a previous 2.75%, so another hike is expected there. Australia's quarterly CPI is also due, consensus 1.3% against 0.6% prior, trimmed mean 1.0% versus 0.8%, and the monthly indicator 4.20% versus 4.00%. Note that the calendar entries themselves carry only consensus and previous figures, no results.

US data on the tape

Consumer confidence was the standout beat: CB Consumer Confidence came in at 91.7 against 81.2 expected and 84.2 prior. Durable goods orders rose 1.8% versus 2.0% expected, core 0.5% versus 0.6%, and non-defence capital goods ex-air 0.5% against 0.7% expected after a strong 1.6%. New home sales fell 0.6%, much better than the -4.5% expected. Richmond manufacturing stayed at -2, Dallas services turned positive at 4.4 from -0.9, Redbook accelerated to 9.3%, and Atlanta Fed GDPNow edged down to 3.4%. The 5-year auction stopped at 4.708%, down from 5.033% previously. API crude showed a 2.031M draw against expectations of a 0.800M build. Thursday brings GDP, core PCE and jobless claims, which is the next real test of the hike debate.

Elsewhere, headline only

A few other items are headline-level only: UK inflation is forecast by Healey to average 3.4% in 2027 and there's a UK Autumn Forecast Statement on the calendar; Lagarde speaks for the ECB; European shares stuttered as bank earnings failed to offset pre-Fed nerves; sterling slipped as AI fears ebbed. The large remainder of this section is TradingView chart posts and routine calendar lines around the Fed, with no additional information behind them.

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