Fed Decision Due at 2 p.m. ET Today as Futures Price a Hold at About 90%, With a December Hike Next in Line

Since the Federal Reserve raised its benchmark rate a quarter point in September, its first hike in three years, the question has shifted from whether it moves again to when. The answer arrives at 2 p.m. ET today, Oct. 28, with a press conference by Chairman Kevin Warsh to follow. The decision has not been announced as of this writing.

The committee's second day of deliberations began this morning, a Fed spokesperson said. The target range stands at 3.75% to 4%.

The odds have moved sharply toward a hold

CME Group's FedWatch tool shows a 90.6% probability of no change, up from 84.5% a week ago and 35.8% a month ago. Other readings of the same tool today run from 88% to about 90%.

For the Dec. 8-9 meeting, the tool shows a 71% to 75% probability of another quarter-point hike. There is no meeting in November.

The shift followed a run of speeches. Vice Chair Philip Jefferson said Oct. 1 that "my colleagues and I will need to come to our own judgment, which may take more time." New York Fed President John Williams said after the September move that "there is no need for urgency, and we have time to gather more information." Warsh said in Bangkok that conditions had "broadly conformed" to policymakers' expectations.

The data cuts both ways

Headline inflation hit 3.7% in September, up 0.6% on the month, against the Fed's 2% target. Core inflation, which strips out food and energy, was 2.6%.

Gasoline, which has stayed above $4 a gallon for three months, accounted for more than half the September increase in consumer prices, the Labor Department said.

The labor market is softer. Employers added 29,000 jobs in September, down from 162,000 in August and well below economist expectations, according to the Bureau of Labor Statistics.

Housing is already absorbing the earlier hike. The average 30-year mortgage rate reached a three-year high of 7.4% earlier this month and slipped to 7.32% last week, against just under 6.2% a year ago. Oxford Economics estimates the increase has put home buying out of reach for another 5 million households.

Hawks on the committee

Not everyone on the committee wants to wait. Dallas Fed President Lorie Logan said in prepared remarks this month that the target range needs to rise "an additional 50 basis points or more." She added: "We must restore price stability."

Prediction markets put the chance of two dissents at 35%, according to the Epoch Times. Logan and Cleveland Fed President Beth Hammack are the names floated as possible votes for a hike. Neither has said she will dissent.

Brookings senior fellow Wendy Edelberg argues that a hold is the expected outcome but sits awkwardly with the September move. "If there was a reason to raise interest rates at the last meeting, I think that there's just as compelling of an economic reason to raise interest rates at this meeting," she told AFP. She also said the labor market has been largely stable.

The softer view comes from Navy Federal Credit Union chief economist Heather Long, who told Fox Business that the data show the Fed needs to act again, "but it's not a five-alarm fire." She expects gas prices, which have eased since September highs, to make October's inflation data a little cooler. Former Dallas Fed President Robert Kaplan has said some of the stickiness stems from "structural issues, particularly the oil spike," not an overheating economy.

The election clock

The meeting falls six days before the Nov. 3 midterms. The Fed says politics does not enter its decisions.

Joseph LaVorgna, chief economist at SMBC Americas and a former Trump administration official, offered a different read. "The Fed doesn't want to poke the White House in the eye six days before an election," he said. Long made a related point, calling an October hike "a very high bar" so close to voting.

This is the fourth meeting of Warsh's tenure. President Donald Trump appointed him earlier this year, and questions about his independence from the White House have followed him.

A test of Warsh's no-guidance stance

Warsh has argued against forward guidance, saying clear signals about the next move commit the Fed to a path and limit its room to respond to data. Several economists told the AP that this month's speeches from top officials looked a lot like forward guidance, only not from the chairman.

That leaves a question for the press conference. Warsh withheld a rate signal at the IMF and World Bank meetings, telling the audience he would not prejudge the Fed's decision. Jesse Marre, senior portfolio manager at Hilbert Group, said he expects "a hawkish hold."

The next scheduled decision is Dec. 8-9, by which point October's inflation data will be in hand and the election will be over.