Fed holds rates steady as two officials, including Lisa Cook, dissent in favor of a hike
Cleveland Fed President Beth Hammack and Governor Lisa Cook wanted a quarter-point increase,, a week before the midterm elections.
The Federal Reserve voted on Wednesday to leave interest rates unchanged, but two officials broke ranks and called for an increase, according to Semafor.
Cleveland Fed President Beth Hammack and Fed Governor Lisa Cook both argued that the central bank should raise rates by a quarter of a percentage point. Semafor reported that Cook had not previously dissented in a Fed vote. The outlet said officials held rates steady because they want more information before deciding whether further hikes are needed to tame inflation.
Chair Kevin Warsh struck what Semafor called his typically hawkish tone after the announcement.
“"if you think that we're tolerating some inflation target somewhere [above 2%], let us disabuse you of it."”Kevin Warsh, Federal Reserve chair
Warsh also said the Fed will take one less vote a year starting in 2027, so officials can "reserve time and space, as an intellectually diverse group, for strategic deliberations."
According to Semafor, the dissents reinforce investor expectations that the Fed will raise rates in December. The outlet reported that the Iran war has continued to push up energy costs, even as other economic indicators look more positive.
The decision also comes amid political pressure. Semafor reported that the Trump administration had warned the Fed against raising rates before next week's midterm elections. Warsh told reporters that "politics played no role in the decision" to hold rates steady. "I just spent two days with my colleagues upstairs; I didn't hear an utterance about politics," he said.
Cook's dissent stands out given her dispute with the White House. According to Semafor, President Trump recently revived his attempt to fire her, repeating his allegations that she committed mortgage fraud, as he keeps pushing for lower rates. The White House has asked Cook to testify on those allegations at what Semafor described as an unusual private hearing next week. Warsh said that, to his knowledge, neither he nor the Fed would be involved.
Several questions remain open. It is not yet known whether the Fed will in fact raise rates in December, or what will come of the White House hearing involving Cook.
Warsh told Semafor that the task forces he created may not finish their work by the end of the year as promised. He said he would attend a hearing next month held by the Fed task force on AI. Semafor reported that Warsh said higher rates are cooling the AI boom as investors push back on tech borrowers, and that he hoped the hearing would show whether AI makes price stability "harder or easier" to achieve over the next several years.
