US Economy Continues To Roar, While The Fed Waits For More

The FOMC voted 10-2 on Wednesday to hold the federal funds rate at 3.75%-4.00%, with the two dissenters favoring a 25bps hike. Yet Fed Chair Kevin Warsh's assessment of the US economy sounded decidedly hawkish. Economic growth is robust and broadening, the labor market is in good shape, inflation remains above the Fed's 2.0% y/y target, and financial conditions are hardly tight. So why did the Fed stand pat?

Warsh argued that September's hike was already tightening financial conditions, inflation expectations remained anchored, and stronger productivity growth was allowing the economy to expand without overheating. With an "information-rich" period ahead, the Fed saw little reason to rush, he said.