Fed holds rates in 10-2 vote as job gains keep pace with workforce
- The FOMC voted 10-2 to hold the federal funds rate at 3.75% to 4%.
- Lisa D. Cook and Beth M. Hammack preferred a quarter-point increase.
- The Fed said job gains have kept pace with the workforce.
- The rate paid on reserve balances stays at 3.90%, effective Oct. 29.
WASHINGTON, D.C., UNITED STATES — The Federal Reserve’s policy committee voted 10-2 on Oct. 28 to leave its benchmark interest rate unchanged, with both dissenters favoring an increase. Policymakers described a labor market in which job gains have kept pace with the workforce and the unemployment rate has changed little.
Two dissenters wanted a hike
The Federal Open Market Committee (FOMC) kept the target range for the federal funds rate at 3.75% to 4%, it said in a statement on Oct. 28. Lisa D. Cook and Beth M. Hammack voted against the decision, preferring to raise the range by a quarter percentage point at this meeting.
“Inflation remains elevated,” the committee said. It added that more information will help it set the policy stance needed for a timely return of inflation to its 2% goal, and that it “will deliver price stability.”
Labor market steady, growth strong
“Job gains have kept pace with the workforce, and the unemployment rate has changed little,” the statement said. The committee described economic activity as expanding at a strong pace, with resilient domestic spending, strong productivity growth and robust capital investment.
It said uncertainty remains elevated, owing in part to geopolitical developments. In a separate implementation note, the Fed said the interest rate paid on reserve balances stays at 3.90%, effective Oct. 29.
Hiring data shows a slow pace
The committee’s reading follows weak September hiring data. OA reported on Oct. 9 that U.S. employers added 29,000 jobs in September as unemployment held at 4.2%, according to the U.S. Bureau of Labor Statistics (BLS), with July and August revised down by a combined 60,000 jobs.
Hourly pay growth also cooled to 3.0% over the 12 months to September, the BLS data showed. The Fed’s statement, by contrast, kept its focus on elevated inflation.
What it means for employers
For U.S. employers, a Fed that reads the labor market as holding steady, with two officials pushing for a rate increase, gives little sign that domestic wage costs or borrowing costs will ease soon. Companies weighing onshore hiring against offshore outsourcing or business process outsourcing (BPO) for support roles can compare providers on the top BPO companies worldwide list.
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