The Fed leaves its rates unchanged but announces a major change from 2027

No surprise. The American Federal Reserve (Fed) decided, Wednesday October 28, to keep its key rates unchanged, a few days before the mid-term elections in the United States, largely dominated by concerns related to inflation. The monetary institution is thus taking a break after raising its rates by 0.25 percentage points on September 16, bringing them to a range between 3.75% and 4%. A decision which, however, was not unanimous. Of the twelve monetary officials called to make a decision, two voted against the status quo. Governor Lisa Cook and Cleveland Fed President Beth Hammack were calling for a further quarter-point hike.

Asked about the political context surrounding this decision, Fed President Kevin Warsh assured that the approach of the midterms, the American mid-term elections, had “played no role” in the choice of the institution.

More room for monetary strategy

If the Fed has not changed its rates, its president has nevertheless announced a change in the functioning of the institution, starting next year.

Towards a new rate hike in December? For Fed officials, the fight against inflation is far from over

“In 2027, one of the meetings will be solely devoted to monetary policy strategies in the broad sense, without voting on rates or commenting on the envisaged policy. In 2028, we will have two of these meetings devoted to strategy and six for monetary policy,” detailed Kevin Warsh.

This reorganization will therefore gradually reduce the number of meetings giving rise to a decision on key rates, in order to leave more room for substantive reflections on the Fed's monetary strategy.

Machine-translated from French