Fed holds rates steady at Warsh’s first meeting.

The Federal Reserve held interest rates steady at its latest policy meeting while signaling deep internal division over the inflation outlook. Fed officials released updated economic projections showing some policymakers expect no rate cuts through 2025, while others believe additional increases remain necessary.

The median projection from Fed officials suggests the fed funds rate will remain in the 5.25% to 5.50% range for the foreseeable future. This represents a hawkish stance as the central bank grapples with persistent inflation pressures that have resisted earlier rate-hike cycles.

The split among Fed governors reflects genuine uncertainty about the inflation trajectory. Some officials worry that price pressures remain elevated enough to warrant keeping rates higher for longer. Others see momentum toward the Fed's 2% inflation target and believe holding rates steady suffices.

This meeting marked a notable moment in Fed governance. Peter Warsh, who previously served as a Fed governor and Treasury official, participated in his first rate-setting meeting in his new role. His presence signals continuity with the Fed's hawkish inflation-fighting approach.

The projections released Friday show the committee's baseline assumption incorporates moderating growth and sticky inflation. Economic data in recent weeks has delivered mixed signals, with wage growth remaining elevated while some goods prices have cooled. The labor market continues running hot, which Fed officials cite as a reason to maintain restrictive policy.

Market reaction focused on what the steady-state guidance means for borrowing costs. Mortgage rates, already elevated near 7%, face pressure to stay elevated if the Fed maintains this hawkish posture through 2025. Credit card rates and auto loan rates will similarly remain high.

The statement stopped short of committing to rate cuts in 2025, a shift from earlier expectations. This forces investors to reassess assumptions about when relief might arrive. If inflation proves stickier than expected, the Fed retains optionality to raise rates again, though officials project this as unlikely under their baseline scenario.

Policymakers signaled patience. They will await more inflation and employment data before signaling any policy shift. The next meeting in December will deliver updated projections and potentially more dovish language if data cooperates.