Dive Brief:
- The Federal Reserve on Wednesday held the benchmark interest rate steady despite data showing that inflation last month accelerated further beyond the central bank’s 2% goal.
- Policymakers in a 10-2 vote decided to collect more data before considering whether to follow up their quarter-point tightening in September with a second increase in the federal funds rate, according to a Federal Open Market Committee statement. Their next scheduled meeting is Dec. 8-9.
- “Inflation remains elevated,” the FOMC said, adding “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.” Two policymakers dissented in favor of raising the main rate by 0.25 percentage point.
Dive Insight:
Data on consumer and wholesale prices in September showed inflation speeding up and prolonging its roughly five-year period above the Fed’s target.
The consumer price index rose at a 3.7% annual rate in September, higher than expected. The 12-month gain in the producer price index of 6.3% last month also exceeded forecasts.
Higher energy prices, pushed up by the U.S.-Israel war with Iran, have spurred price increases across much of the economy and show no sign of declining. The price for a barrel of Brent crude oil has surged 80% during the past year to $115.75.
The extended period of rising prices has eroded real incomes and undermined household budgets, influencing the outlook of voters with the approach of the Nov. 3 mid-term elections.
Policymakers painted a bright picture of the economy.
“Economic activity is expanding at a strong pace,” the FOMC said. “While uncertainty remains elevated owing, in part, to geopolitical developments, domestic spending has been resilient.
“Productivity growth is strong, and capital investment is robust,” the FOMC said. “Job gains have kept pace with the workforce, and the unemployment rate has changed little.”
Since taking the top post at the central bank in May, Fed Chair Kevin Warsh has repeatedly vowed to quell inflation, saying that “inflation is a choice.”
For now, however, with the elections less than a week away, the watchword among policymakers on the topic of inflation is apparently “wait and see.”
This is a developing story. Read more on our website for live updates.
