Fed Holds Rates at 4% as Warsh Rejects Looser Inflation Target

Fed Chair Kevin Warsh faced a divided board and a market pricing in a future hike as the Federal Reserve held its benchmark interest rate steady on Wednesday. The central bank concluded its two-day October meeting without changing the target range for short-term rates, which remains at 3.75% to 4%. Warsh’s insistence on a rigid inflation goal clashed with the preference of two policymakers who voted for an increase.

Warsh made the committee’s stance clear during his post-meeting press conference. He rejected the notion that the bank might allow inflation to settle above the official benchmark. "There is no soft inflation target," he said. The Fed’s policy statement noted that inflation remains elevated and that officials want more data before making their next move. This follows the bank’s first rate increase in three years, which occurred in September.

Financial markets barely reacted to the decision. U.S. stocks were roughly flat in the afternoon session, slipping slightly from their pre-announcement levels. Traders continue to expect a rate hike in December, with the probability standing at more than 80% both before and after the Fed’s announcement. Warsh also indicated that the Fed plans to reduce the number of rate-setting meetings in the coming years.

A separate surge in memory and storage stocks provided a bright spot in an otherwise muted session. South Korea’s SK Hynix reported sharply higher quarterly revenue and operating profit. The company expanded its plans to return capital to shareholders and stated that it expects memory demand to keep outpacing supply. SK Hynix shares trading in the United States rose more than 12.5%.

U.S. competitor Micron followed suit, gaining nearly 6% in its fourth consecutive winning session. The stock remains about 19% below its record closing high of $1,213 set in June, but it is still up 240% for the year. In other technology news, Apple released its first touchscreen laptop on Wednesday, a move that reversed its long-held position against building one. The new touchscreen MacBook Pro models start at $2,899, compared with $1,999 for the new non-touchscreen 14-inch model with the M6 chip.

Investors now look to a heavy slate of corporate earnings to gauge economic health. Alphabet, Microsoft, and FedEx are among those reporting after the close on Wednesday. Other late-day reporters include Ford, T-Mobile, Carvana, Honeywell Aerospace, MGM Resorts, ServiceNow, eBay, Chipotle, and Fortinet. Eli Lilly, Linde, Caterpillar, Merck, and Bristol Myers reported before the open.

Key economic data will arrive on Thursday morning. The government will release the September PCE price index and the first estimate of third-quarter GDP. These figures will provide further context for the Fed’s decision to hold rates steady while two dissenters argued for a hike.