The news
The US Federal Reserve held the federal funds target range at 3.75%-4.00% on Wednesday, 28 October, as widely expected. The decision follows a 25-basis-point increase in September, the Fed's first hike in about three years.
The vote was 10-2. Governor Lisa Cook and Cleveland Fed President Beth Hammack dissented, both preferring to raise rates by a quarter point immediately.
What the Fed said
The policy statement described economic activity as expanding at a strong pace and said inflation remains elevated. Job gains have kept pace with growth in the workforce, and unemployment is little changed. The Fed reaffirmed its 2% inflation goal.
Chair Kevin Warsh said the central bank has made clear its "willingness and readiness to act". He added that the "monetary medicine" is "starting to work some", noting that lenders and investors have become "more discerning".
Market reaction
- Dow Jones: +97.53 points (+0.19%) to 52,475.10
- S&P 500: +21.37 points (+0.28%) to 7,743.97
- Nasdaq Composite: +72.04 points (+0.27%) to 26,549.85
- US 10-year Treasury yield: around 5.01%
- Gold: near $4,050-$4,060 an ounce into Thursday's Asian session
CME FedWatch data put the probability of a 25-basis-point hike in December at 85.0%, up from 78.3% a day earlier. Eight of the 11 S&P 500 sectors finished higher, led by technology. Utilities and real estate lagged.
"The Fed didn't throw any curveballs," said Ryan Detrick of Carson Group. He argued that the bigger question for markets is whether AI spending continues.
Earnings in the background
About 200 S&P 500 companies have reported third-quarter results so far, and 84% beat analyst estimates, according to LSEG. Aggregate earnings growth for the quarter is estimated at 31.8% year on year.
After the closing bell, Microsoft shares rose more than 4% and Alphabet fell more than 7% following their quarterly results.
What it means for investors
A pause with two hawkish dissents leaves the tightening bias firmly in place. Dollar-pegged currencies follow the Fed's path, including the Jordanian dinar and most Gulf currencies. A December hike would therefore feed through to borrowing costs and bank deposit rates across the region, including the dinar balances that matter for Palestinian banks and listed companies.
What to watch
US third-quarter GDP and September PCE inflation data, both due Thursday, will test how much more tightening the economy needs. The next FOMC decision, in December, is now priced as a likely hike.
