Warsh Says Politics Played No Role in Fed Hold, Announces Fewer Rate Meetings From 2027

Since the Fed raised rates a quarter point in September, its first hike in three years, inflation has climbed from 3.4% in August to 3.7%. Today, Oct. 28, Chairman Kevin Warsh explained why the committee held at 3.75% to 4% anyway, and he made a structural announcement nobody expected.

Warsh: 'Politics played no role'

Warsh faced the obvious question at his 2:30 p.m. ET press conference. The decision came six days before the Nov. 3 midterms, in an election dominated by the cost of living.

His answer was flat. "Politics played no role in the decision," he said. "I just spent two days with my colleagues upstairs. I didn't hear an utterance about politics."

The Fed's statement said "inflation remains elevated" and that holding off allows "the accumulation of more information" to guide the next move.

Warsh said energy and related prices "have moved higher again in recent weeks." He said the Fed's job is to keep those relative price changes from broadening across the economy.

He also argued financial conditions have already shifted. Credit has "tightened for some businesses and households, much as we would expect," he said. Overall conditions are tighter, but he was "unwilling and unable to call them tight."

Fewer meetings starting in 2027

The bigger surprise was procedural. The Fed's policy committee currently holds eight scheduled meetings a year, a cadence in place since the 1980s. Warsh announced it will hold seven in 2027, one of them devoted to "broad monetary policy strategy."

In 2028 there will be six policy meetings and two strategy meetings. Warsh, who became chairman in May, first raised the idea at the committee's closed-door July session. The New York Times first reported that discussion, and the published minutes later confirmed it.

The skeptics

Not everyone is buying the no-politics line. ZeroHedge argued ahead of the press conference that Warsh "cannot acknowledge" a hike would have been "politically radioactive" without undercutting the Fed's claim to independence. It noted that every argument for waiting, such as one hot print not being a trend, was available a month ago.

The site also quoted JPMorgan's Mike Feroli: a decision to leave rates unchanged less than a week before the midterms "that goes unexplained would only encourage thoughts that policy is being driven by considerations other than employment and inflation."

The record shows the committee was not unanimous. Governor Lisa Cook and Cleveland Fed President Beth Hammack voted for a quarter-point hike.

History offers no clean pattern. CNN noted that outside the pandemic, the Fed adjusted rates within two months of Election Day in four of the five most recent election years. In 2016, then-Philadelphia Fed President Patrick Harker backed a September hike but opposed one six days before the election, saying it might be prudent to wait out the uncertainty. Then-Chair Janet Yellen said the election played no role in the committee's decisions.

Trump and the Cook fight

The political backdrop did not come from the press room alone. Trump has said interest rates "should be 1% or less." He has also said that, apart from Warsh, the Fed board is full of Democratic-appointed members who "would like to see the country do badly."

Warsh declined to respond to that remark. He called this week's meeting "a heck of a family fight" and said he was "honored to be chairman of this group."

Cook, one of the two dissenters in favor of a hike, is fighting Trump's effort to fire her. The White House has demanded she attend an in-person hearing to answer allegations of mortgage fraud, which Trump has cited as grounds for removal. Those are allegations; the sources here show no charge against her.

Markets and what comes next

The S&P 500 closed 0.3% higher after choppy trading while Warsh spoke. Treasury yields had ticked up earlier in the day on debt concerns and rising oil prices.

Warsh gave little guidance on what comes next. Wall Street still sees the odds of a quarter-point hike at the Dec. 8-9 meeting at nearly 85%, according to CME FedWatch.

"It's likely going to take one more (hike) from the Fed to get interest rates into restrictive territory," said Michael Reynolds, vice president for investment strategy at Glenmede. Diane Swonk, chief economist at KPMG, told clients: "Don't mistake a pause for a truce; the battle against inflation is far from over."

Fed Governor Christopher Waller said earlier this month that hikes "do not need to come at consecutive meetings, but they should be in place in an acceptable period of time."

Some inflation drivers, including the AI infrastructure buildout and higher energy prices, may not respond easily to higher rates. The Fed will see October inflation data before December. That data will show whether the committee's wait for "more information" ends in the hike markets now expect.