The Fed held at 3.75%-4.00% this week, with Cook and Hammack dissenting in favor of a hike.

The Fed held at 3.75%-4.00% this week, with Cook and Hammack dissenting in favor of a hike. The hawkish side has only gotten louder since the decision. Dallas Fed President Lorie Logan, a 2026 voter, said the FOMC needs at least two more 25bp hikes before it would make sense to pause. She described the October hold as having "skipped an increase" that "does not change the monetary policy destination."

She had company. St. Louis Fed President Alberto Musalem said additional firming will be necessary "and soon," arguing that incremental moves made earlier are less disruptive than abrupt ones later. Richmond's Tom Barkin called the direction "pretty straightforward" and framed pace as the real question, noting the Fed signaled a gradual approach.

The data gives the hawks cover. September PCE came in at 3.6% year-over-year on the headline, with prices up 0.5% in that single month. Core rose to 3.1% from 3.0% in August, up 0.3% on the month. Both are well above the 2% target.

Markets had a bigger problem on Friday. $SPY fell 1.77% to $755.72, after trading as low as $750.36, and the Nasdaq hit a near three-month low. The main driver was Intel and Amazon results deepening worries about AI spending, with the rate outlook as an added weight rather than the cause. My read is that the hold was a delayed hike, and the market hasn't fully priced that yet.

Sources:
24/7 Wall St via Yahoo Finance: https://finance.yahoo.com/economy/policy/articles/two-fed-officials-just-called-142756281.html
PrimeRates (citing BEA): https://primerates.com/core-pce-rises-3-1-percent-september-under-fed-3-4-projection/

Not financial advice. For informational and educational purposes only.