Fed Chair Warsh Holds Rates Steady as September Inflation Tops 3.7%

Inflation accelerated from 3.4% in August to 3.7% in September, prompting the Federal Reserve to leave interest rates unchanged on Wednesday. The decision marks the final monetary policy move before the midterm elections. Rising costs for gasoline, diesel, and crude oil drove much of the increase. Many economists note that these higher fuel prices are now spreading to other parts of the economy.

The Fed’s statement acknowledged that inflation remains elevated. The committee said it wants more information before deciding on a rate increase. The goal is to ensure a timely return to the central bank’s 2 percent target. The personal consumption expenditures price index, the Fed’s preferred gauge, is due out Thursday and is expected to match the 3.7% figure.

Morgan Stanley economists said the data suggests the Fed may not be finished tightening. They expect future rate hikes to depend on incoming data. The vote was not unanimous. Governor Lisa Cook and Cleveland Fed President Beth Hammack dissented in favor of a hike. This was the first dissent of Cook’s career. President Donald Trump is currently attempting to fire her.

Fed Chairman Kevin Warsh announced that the central bank will cut the number of rate-voting meetings from eight to seven next year. The schedule will shrink by two more meetings in 2028. Warsh said this change would improve the quality of its decisions. At a news conference, he described real economic activity as pointing in the right direction. He added that inflation remains too high.

The committee described domestic spending as resilient and economic activity as expanding at a strong pace. It noted that uncertainty remains elevated due to geopolitical developments. Warsh stated that politics played no role in the decision. He defended his colleagues against recent claims by Trump that board members were hostile to the president. He described the committee’s discussion as serious and sober.

A recent NBC News poll showed Trump’s approval at 27% on the cost of living and 29% on the Iran war. Two-thirds of Americans called soaring gas prices a serious problem. More than half said economic conditions had changed the groceries they buy. With inflation well above the Fed’s goal, the announcement sets the stage for a possible rate increase at the December meeting.