Fed votes in split decision to hold interest rates steady despite sticky inflation

With the midterm elections less than a week away, the Federal Reserve held interest rates steady on Wednesday, even as the latest inflation reports show prices rising again.

The central bank voted in a split decision to hold its benchmark interest rate steady in the range of 3.75% to 4%, after raising rates last month for the first time in more than three years.

Cleveland Fed president Beth Hammack and Fed governor Lisa Cook broke ranks, preferring to raise rates by a quarter percentage point. This is the second time since July Hammack has dissented in favor of raising rates and Cook's first dissent in her tenure.

Officials said they are focused on reviewing additional data to inform future rate decisions, adjusting their policy statement to say that "the accumulation of more information will help the Committee determine the policy stance appropriate to ensure a timely return of inflation to the committee's 2% goal."

The latest inflation reports show price growth has accelerated since September's hike.

The Consumer Price Index clocked in at 3.7% last month from 3.4% in August. Stripping out volatile food and energy prices — the way the Fed likes to scrutinize underlying inflation — CPI rose 2.6%, compared with 2.4% in August. Wholesale prices jumped more than 6% last month, and the Fed's preferred inflation gauge — the core Personal Consumption Expenditures Price index, due out Thursday — is projected to top 3%.

Fed Chairman Kevin Warsh, in a press conference on Wednesday afternoon, acknowledged that the job of containing inflation is unfinished.

"If you were listening next to me in that room the last couple of days, the overwhelming consensus, the overwhelming judgment, is that what we've done in this monetary medicine [is] starting to work some, but there's no firm conclusions," Warsh said. "I'm encouraged by the progress we've made in a short period of time. But if the crux of your question is 'you haven't delivered yet, you haven't achieved price stability,' you're right about that.

Warsh announced a change to the Federal Open Market Committee's meeting schedule, beginning next year. They will still meet eight times a year, but one meeting will "focus exclusively on broad monetary policy strategy, with neither a vote on the federal funds rate nor a policy statement anticipated," Warsh said.

In 2028, he said, two meetings will be dedicated to strategy and six to setting policy.