Episode summary
Fed Split Over Rates: Why Didn't The Fed Hike Today?
The David Lin Report
· · 21 min · Hosts: David Lin
Summary
The Federal Reserve held rates steady in a 10–2 decision even as inflation stayed above target and the 10-year Treasury yield pushed just above 5%. The chair said the economy has strengthened, with GDP revised up, consumer spending and business investment still firm, and the labor market holding up. He also said the committee needed more information before deciding whether policy should move again, while CME FedWatch assigned an 85% chance of a December hike.
The chair framed the decision as part of a broader shift in policy strategy rather than a single meeting call. He argued that the Fed has already removed some accommodation, that financial conditions have tightened, and that policymakers are now focused on getting inflation back to 2% without “throw[ing] sand in the gears of the economy.” He also said the Fed will cut meeting frequency in 2027 and reserve some sessions for strategy discussions.
On inflation drivers, the chair said interest rates affect almost everything, including the AI investment boom, but he did not think the current strength of the economy meant policy was failing. He said tighter financial conditions suggest policy is working, though he declined to guide the market on whether a December hike is coming.
Key takeaways
- The Fed held the policy rate at 3 and 3/4 to 4% in a 10–2 vote, with Lisa Cook and Beth Hammock dissenting for a hike.
- The chair said the economy is stronger, inflation remains elevated, and the committee needs more information before deciding on December.
- The chair said the AI investment boom is not immune to rates and that credit spreads and financial conditions have tightened since September.
- The chair said he does not believe in forward guidance outside a crisis and would not pre-commit to the December meeting.
- The Fed will keep eight meetings per year, but one 2027 meeting will be reserved for strategy with no rate vote or policy statement.
Notable quotes
“inflation remains elevated. The committee believes that the accumulation of more information will help it determine the policy stance appropriate to ensure a timely return of inflation to the 2% goal”
“I'm unwilling and unable to call them tight. But broadly, these developments go in the direction of achieving a longer, more durable period of economic growth and price stability”
“Interest rates get in the cracks. Interest rates affect directly or indirectly um almost everything”
“the goal in my view and you've heard me say this before isn't to throw sand in the gears of the economy and throw people out of work”
How the episode opens
It's Wednesday, October 28th, and the Federal Reserve just held rates steady, but the vote was 10 to2. Governor Lisa Cook and Cleveland Fed President Beth Hammock both wanted a hike. I'm Matt Milligan, producer, filling in for David Lynn today.
Chair Wars' statement upgraded the economy from solid to strong, and he announced fewer rate votes, seven next year and just six in 2028. The S&P 500 and NASDAQ both closed slightly higher today, and the 10-year Treasury yield rose to just above 5%. As of Wednesday afternoon, CME's Fed Watch tool put the odds of a December hike at 85%.
Here's Cheer Worsh's opening statement. He says the economic growth has strengthened, but inflation has run above the Fed's target for close to 6 years. This morning, the FOMC decided to maintain the target rate for the federal funds rate at 3 and 3/4 to 4%.
In support of the Federal Reserve's dual mandate, economic activity is expanding at a strong pace. While uncertainty remains, owing in part to geopolitical developments, domestic spending has been resilient, productivity growth is strong, and capital investment robust. Job gains have kept pace with the workforce and the unemployment rate has changed little, but inflation remains elevated.
The committee believes that the accumulation of more information will help it determine the policy stance appropriate to ensure a timely return of inflation to the 2% goal. The committee will deliver price stability. At each policy meeting, my colleagues and I assess the economy by looking out the window.
It's what we call interrogating reality to gauge what's really going on. It is not a task that has grown easier. So, what exactly do we observe?
Economic growth has strengthened. The GDP increase in the first half of this year was revised up from an earlier estimate of 1.8% 8% up to 2.4%.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- fed rates decision
- inflation outlook
- treasury yields
- december rate hike
- financial conditions
Companies and tickers mentioned
- Federal Reserve
- New Orleans Investment Conference
Watch the episode
Watch “Fed Split Over Rates: Why Didn't The Fed Hike Today?” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
More from The David Lin Report
-
Jensen Huang RESIGNS After Second Affair: Nvidia's $855B Wipeout, What Next? -
New Global Arms Race Begins: Who Wins Trillion-Dollar Defense Boom? | Juno Industries -
Collapse Of Tech? Rosenberg &. Bianco Debate AI Bubble, Soaring Bond Yields -
Buy The Dip Or Short? Trader Reveals Key Signals | Jason Shapiro -
Nvidia Spy Scandal: $450B Crash Just The Beginning? -
Brutal 2027: How The Next Financial Crisis Starts
The David Lin Report, this episode and its artwork belong to The David Lin Report. Octagon is not affiliated with the show; this page is an independent summary.
