The US Federal Reserve kept its target range for the federal funds rate at 3.75%-4% on Wednesday. The Fed said inflation remains high, but it wants more information before changing rates again. It also said the US economy remains resilient despite uncertainty. The decision came in the week before the US midterm elections.
Ten of the 12 committee members voted to hold rates. Governor Lisa Cook and Cleveland Fed President Beth Hammack voted to raise them to 4%-4.25%. According to Semafor, Cook had never before dissented in a Fed vote. Semafor reported that the dissents strengthen investor expectations of a hike in December.
Fed Chair Kevin Warsh told reporters that September's rate rise was "starting to work some". He said inflation is still too high, but tightening credit conditions show the economy is moving in the right direction. He declined to say where rates will go at the next meeting in six weeks. According to Semafor, he said the Fed does not tolerate inflation above its 2% target.
Figures released after the announcement showed the US economy grew by 3.4% on an annualised basis in the three months to September, the BBC reported. That was stronger than analysts had expected. Private investment rose by an annualised 19.4%, which analysts largely attribute to artificial intelligence. Prices rose 3.7% in the year to September, pushed up by fuel and energy costs linked to the war in Iran.
The decision also has a political dimension. Semafor reported that the Trump administration had warned the Fed against raising rates before the midterms. Warsh said that "politics played no role in the decision". President Donald Trump has revived his attempt to fire Cook over mortgage fraud allegations. The White House has asked her to testify at a private hearing next week.
Warsh also said the Fed will hold one fewer rate vote a year from 2027. He said he will attend a hearing next month by a Fed task force on AI. According to Semafor, he said higher rates are cooling the AI boom as investors push back on tech borrowers.
In Kenya, Business Today said the pause could help emerging and frontier markets, including the Nairobi Securities Exchange. The outlet pointed to capital flows: a less restrictive US rate path can make these markets more attractive to investors.