The Federal Reserve is widely expected to pause rate hikes at today’s FOMC meeting, holding the federal funds target range at 3.75 to 4 percent after September’s quarter point increase, even as Chair Kevin Warsh prepares to strike a hawkish tone in his press conference.
Markets price less than a 10 percent chance of another hike today, according to CME FedWatch, after the September 16 decision raised rates for the first time in years on a unanimous 12 to 0 vote.
September’s statement noted solid economic expansion, resilient domestic spending, strong productivity and capital investment, and an unemployment rate that has changed little, while stressing that inflation remains elevated and that the action would support a timelier return to the 2 percent goal. September CPI later printed at 3.7 percent year over year, driven partly by energy, and PPI reached 6.3 percent, keeping price pressures well above target.CNBC
Several factors favor a pause rather than back to back hikes. Officials have signaled patience after the September move, preferring to assess additional data on whether inflation is moderating or remaining sticky enough to require more tightening. The meeting falls less than a week before midterm elections centered on the cost of living, reducing the appetite for bold action. Hiring has been relatively soft, with job growth ahead of the September hike among the weakest preceding any increase in decades, and the labor market remains in a low hire, low fire posture.
Without a new Summary of Economic Projections or dot plot today, the statement itself is expected to be relatively restrained, leaving the door open for a December move that markets already largely anticipate .Reuters
Warsh, however, is likely to sound hawkish regardless. (And this as always is a short term risk for gold and silver on FOMC day). At Jackson Hole he argued that the economy remains strong, inflation is broad based across the PCE basket and stuck above target, and the Fed’s predominant focus should be prices rather than employment. He has stressed that underlying trends have not meaningfully improved and that the Committee must be confident inflation is moving to 2 percent clearly and at sufficient speed, or else it has more work to do.
Warsh has also criticized excessive forward guidance and prefers a quieter Fed focused on delivering results, yet he has repeatedly framed inflation as a monetary policy choice and reaffirmed the 2 percent target as firm. After September he reiterated that too much of the consumption basket is seeing uncomfortably large increases and that geopolitics and energy shocks remain on the Committee’s mind. Kpler
The tension is clear. A hold allows time to evaluate whether September’s hike is sufficient or whether further increases are needed by year end, consistent with the median September projection of a 4.1 percent funds rate at the end of 2026. At the same time, Warsh’s press conference is the main event for markets. He will almost certainly emphasize that inflation remains too high, that progress is insufficient, and that the Fed retains the capacity and willingness to tighten further if data warrant it. This balances the desire to avoid consecutive hikes while preserving credibility on the inflation mandate ahead of the December meeting, when projections return and another hike is more fully priced.
Investors will parse both the statement’s language on inflation and labor and Warsh’s responses for any shift in the balance of risks. The pause itself is the baseline expectation.
The hawkish coloration of the accompanying commentary is the more consequential variable for yields, the dollar, and of most concern to us and our readers- gold and silver prices.
