WASHINGTON — The Federal Reserve is widely expected to leave interest rates unchanged when its Federal Open Market Committee concludes a two-day meeting today, as policymakers weigh persistent inflation against arguments for a more gradual approach to raising borrowing costs.
The central bank is expected to maintain its benchmark federal funds rate at 3.75% to 4%, following a quarter-percentage-point increase in September. In a Reuters survey conducted Oct. 16-20, 94 of 100 economists predicted no change this week, while all 100 anticipated an increase at the Fed’s December meeting.
The October decision would amount to a pause rather than an end to monetary tightening. Inflation remains above the Fed’s 2% target, while higher energy prices and a resilient economy have reinforced concerns that price pressures could persist. Reuters reported that economists expect upcoming inflation and economic growth figures to show renewed price pressures and stronger activity.
‘Consequential Comments’
Federal Reserve Chair Kevin Warsh’s comments after the decision could prove more consequential than the rate announcement itself. Warsh has generally avoided signaling future moves, leaving investors to interpret remarks from other officials and incoming economic reports.
New York Fed President John Williams and Fed Vice Chair Philip Jefferson have urged patience before another increase. Other policymakers, including Dallas Fed President Lorie Logan, have emphasized the need for additional tightening to bring inflation under control, according to Reuters.
The Associated Press reported that investors also will watch for dissenting votes, particularly from officials who favor an immediate increase. The meeting takes place less than a week before the Nov. 3 midterm elections, adding scrutiny to the Fed’s independence and its response to inflation.
Investors Price in an Increase
MarketWatch reported Tuesday that investors were pricing in nearly an 80% probability of a December rate increase. For consumers and financial institutions, the Fed’s next moves could influence deposit pricing, lending rates and broader borrowing costs, although longer-term rates also respond to bond markets and economic expectations.
The committee is scheduled to announce its decision Wednesday, followed by Warsh’s news conference.
