The Federal Reserve maintains interest rates with two dissenting votes in the FOMC

IN 30 SECONDS

• What has happened? The FOMC, the committee that decides rates in the Federal Reservehas kept them in the range of 3.75% to 4.00% with a vote of 10-2.
• Who is behind? The president of the Federal Reserve, Kevin Warshdefended the majority; Lisa Cook and Beth Hammack They voted to raise a quarter point.
• What impact does it have? Sustained high rates in the US keep the dollar firm, make the refinancing of Spanish debt more expensive and put pressure on the euro-dollar exchange.

The Federal Reserve maintains interest rates at 3.75%-4.00% with a vote of 10-2.

He FOMC (the Federal Open Market Committee, the body that sets the price of money in the United States) closed on Wednesday in Washington with ten votes in favor and two against. The governor Lisa Cook and the president of the Cleveland Federal Reserve, Beth Hammackthey did not ask for cuts. They asked for a quarter point more. It is Cook’s first dissent since taking office and Hammack’s second since July.

A 10-2 vote with inflation at 3.7% and oil on the rise

Macroeconomic photography explains the fracture. Annual inflation closed September at 3.7%, with gasoline rising sharply due to the war with Iran. In September the committee had already applied a quarter point, the first increase since 2023. The central bank pursues a target of 2% that it does not quite reach.

Beth Hammack He warned this on October 12, in a speech prior to the meeting. With each passing month, persistently high inflation increases the risk of an inflationary mentality taking root in the economy,’ he said.

Lisa Cook On September 28, he pointed out three focuses: energy, food, and transportation, in addition to the accelerated deployment of artificial intelligence and bottlenecks in supply chains. Regarding the September increase, she was explicit: ‘This increase was to attack inflation, which has been high for too long.’

The Fed isn’t arguing whether inflation is a problem: It’s arguing how many months it can afford to wait before rising again.

Kevin Warshchairman of the Federal Reserve, defended the majority in the subsequent press conference. ‘If you had listened to me in that room the last two days, the overwhelming consensus is that this monetary medicine is starting to work somewhat, but there are no firm conclusions,’ he said. And he added: ‘I’m not going to be the one to say that the price of oil has not risen.’

The official statement from the committee also made a move. He described economic activity as expansive at a ‘strong pace’, an improvement over September’s assessment, underlined the resilience of domestic spending and noted that unemployment has barely budged. More growth and less unemployment are arguments to wait without haste. The full text is available on the Federal Reserve website.

The Spanish channel: from the American bonus to the companies’ invoice

The official rate of 3.75%-4.00% in the United States does not stay in Washington. It marks the bottom of the price of money in half the world. The Spanish debt is financed with a premium over the American bond, so that every month that the Fed keeps its foot on the brakes translates into more expensive refinancing for the Treasury and more pressure on the cost of mortgages.

The euro-dollar crossing is the other thermometer. With the Fed quiet and a European Central Bank with no clear margin to continue falling, the euro finds no arguments to recover the lost ground. The rate differential is what rules, and today it plays in favor of the dollar.

Spanish companies with interests in the United States —Santander, BBVA, Iberdrola, Ferrovial— budget projects with that reference. Tourism also notices the effect: a strong dollar makes the trip to Spain cheaper for Americans and more expensive for Spaniards who cross the Atlantic.

Washington Logic

Why does the committee sit still when two of its members report that they are late? Because the mandate is twofold—inflation and employment—and today the indicators point in different directions: high prices, solid labor market. In this situation, the majority prefers to see the full effect of the September increase before moving the lever again. It is not indecision. It’s sequencing.

The expression ‘monetary medicine’ that he used warsh refers to an old and very American manual: that of Paul Volkerthe president of the Fed who in 1979 agreed to raise rates to 20% and cause a recession rather than coexist with uncontrolled inflation. That bet cost him Republican Party several elections and gained the central bank four decades of credibility. Every time the Fed discusses whether to wait or tighten, it is actually discussing how much of that legacy it wants to preserve.

Added to that is politics. donald trump has publicly called for lower rates and has tried to remove Lisa Cook of the council of governors over accusations of mortgage fraud that she denies, according to The Daily Caller. The detail is not minor: Cook’s dissenting vote was for going up, not for going down, which leaves the White House on the opposite side of its own governor. The question is whether the committee is waiting for data or waiting for the political tone to change.

The risk that the two dissidents point out is the classic one: arriving late and having to push twice as hard. The next FOMC meeting, expected in December, will say whether the 10-2 was a warning or an exception. Madrid and Brussels will watch the same press conference with different interest: that of knowing how much longer they are going to pay the financing at Washington’s price.

Case File

• The case: The FOMC kept rates at 3.75%-4.00% with two dissidents calling for an additional quarter point in the face of 3.7% inflation.
• Key data: Vote 10-2; Lisa Cook and Beth Hammack in favor of going up; annual inflation of 3.7% in September; activity at a ‘strong pace’ according to the statement; quarter-point increase already applied in September, the first since 2023.
• For Spain: Sustained high rates in the US make refinancing Spanish debt more expensive, keep the dollar firm against the euro and condition the budgets of Santander, BBVA, Iberdrola either Ferrovial in the American market.