Fed Holds Rates Steady; Warsh Flags Persistent Inflation, Plans to Cut Rate Decisions to Six Annually by 2028
HK01 · 11 SOURCES1 day ago2 MIN
Summary
The Federal Reserve held interest rates steady on October 29, 2026, maintaining the federal funds rate target at 3.75% to 4% . Two policymakers dissented, favoring an additional 0.25% rate increase, while Chairman Kevin Warsh emphasized that inflation remains elevated and the central bank needs more data before charting a clear path forward . The Fed also unveiled plans to restructure its meeting schedule, reducing annual rate-setting meetings from eight to six starting in 2028, with dedicated sessions for long-term strategic discussions . In Hong Kong, major lenders including HSBC and BOC Hong Kong kept their prime rates unchanged at 5%, while the Hong Kong Monetary Authority (HKMA) maintained the overnight base rate at 4.25% .
Key Points
- The Federal Open Market Committee voted 10-2 to hold rates, with Fed Governor Lisa Cook and Cleveland Fed President Beth Hammack favoring a 0.25% hike; this marked Cook's first dissenting vote as a board member
- The Fed upgraded its assessment of the economy from "solid" to "strong" expansion, while acknowledging inflation remains elevated and may require extended data observation
- Market pricing indicates an 82.6% probability of a rate increase at the December meeting, with US 10-year Treasury yields climbing back above 5%
- HSBC and BOC Hong Kong both maintained their 5% prime rates and savings deposit rates unchanged; the HKMA kept the overnight base rate at 4.25%
- Starting in 2027, the Fed will hold one annual meeting dedicated exclusively to macro-monetary strategy discussions without rate votes; by 2028, these strategy sessions will increase to two, reducing rate-setting meetings to six
Why It Matters
The Fed's decision to pause after last month's rate increase signals a cautious approach amid conflicting economic signals, with the December meeting now in focus as markets price in an 82.6% chance of resumed tightening . For Hong Kong, the HKMA's warning about interest rate uncertainty and potential HKD weakness due to the USD-HKD rate differential directly impacts borrowers and investors, who should carefully evaluate rate risks when making property purchases, investments, or loan decisions . The restructuring of Fed meeting schedules signals a potential shift in how monetary policy is communicated and debated, with implications for global market expectations .
The Fed's decision to pause after last month's rate increase signals a cautious approach amid conflicting economic signals, with the December meeting now in focus as markets price in an 82.6% chance of resumed tightening . For Hong Kong, the HKMA's warning about interest rate uncertainty and potential HKD weakness due to the USD-HKD rate differential directly impacts borrowers and investors, who should carefully evaluate rate risks when making property purchases, investments, or loan decisions . The restructuring of Fed meeting schedules signals a potential shift in how monetary policy is communicated and debated, with implications for global market expectations .