Fed interest rate decision and Warsh press conference: 5 points

The US Federal Reserve (Fed) voted on Wednesday to keep its benchmark interest rate unchanged. In a subsequent press conference, Federal Reserve Chairman Kevin Warsh shared some of his thoughts on the current state of the U.S. economy and how it will affect monetary policy. But for Fed enthusiasts, the big news may have been Warsh’s announcement of some upcoming procedural changes.

Here are five key points.

Not surprising. Markets widely expected the Fed to maintain policy, and that’s exactly what happened. In explaining its decision, the Federal Open Market Committee emphasized a patient approach, saying, “The accumulation of further information will help the Committee determine the appropriate policy stance to return inflation to the Committee’s 2% goal in a timely manner.” Now, one surprise: If there was one eyebrow-raising moment from the afternoon, it was Mr. Warsh’s revelation of changes to the way FOMC meetings are held. The committee is scheduled to meet eight times in 2027, but one of those meetings will not include a vote on interest rates or a post-meeting statement. There will be two “strategy” meetings next year, and there will only be six opportunities to adjust interest rates, excluding emergency meetings. The opposition from several members was not a shock. But one “no” vote from Gov. Lisa Cook was shocking. Governors rarely oppose interest rate votes, and Cook hasn’t done so since taking office in 2022. Cleveland Fed President Beth Hammack also opposed the decision. The impact of AI: Warsh took the opportunity to talk about the impact artificial intelligence is having on economic growth, essentially saying it’s just one of several factors driving the economic expansion he’s touted as strong. Adding musical chairs: The September meeting shortened the post-meeting press conference, cutting the usual 45 minutes or so to 30 minutes to fit in with Wednesday’s event. Additionally, reporters were limited to one question, a change from the traditional two-on-one approach of media members. Finally, Mr. Warsh last month changed the seating in the room, moving from an almost arbitrary approach of placing representatives of large companies in front of them to alphabetical order. This month featured a reverse alphabetical order, which made the person holding the microphone nervous.

What they are saying:

“The Fed is leaning toward patience. There is so much uncertainty given recent geopolitical developments that the Fed likely wants to wait for further information on the appropriate level of interest rates.” —Phil Campore, chief investment strategist at JPMorgan Wealth Management.

“The Fed has time…but the direction remains clear. The Fed is still reversing some of last year’s rate cuts, but the two dissenting voices emphasize its tightening trend. We expect a rate hike in December and another in early 2027.” — Seema Shah, Chief Global Strategist at Principal Asset Management.

“We hesitate to characterize his communications as particularly dovish or hawkish…The bottom line is that the Fed’s policy response is not black and white…Markets have adapted to Warsh’s communication style, but there may still be a way to go before the two sides are completely on the same page.” — Thomas Simmons, chief U.S. economist at Jefferies.