On Wednesday, the Federal Reserve voted 10-2 to keep its benchmark rate at 3.75% to 4%, choosing patience six days before the midterm elections. Governor Lisa Cook and Cleveland Fed President Beth Hammack dissented, each preferring a quarter-point increase — an unusually rare pairing of a governor and regional Fed president on the same side.¹

Chair Kevin Warsh cast the decision as a deliberate pause, saying the committee wanted to “take stock of where we are” and assess whether the near-term data would provide greater clarity. He said the consensus was that the Fed’s “monetary medicine is starting to work some,” though there were “no firm conclusions.”¹ The Fed nevertheless acknowledged that inflation remained elevated while upgrading its assessment of economic activity to a “strong pace.”¹

That restraint immediately faced a tougher test on Thursday. Commerce Department figures showed GDP grew at a 3.4% annualized rate in the third quarter, beating expectations, while September’s PCE price index rose 0.5% on the month and 3.6% from a year earlier. Core PCE ran at 3.1% annually — still well above the Fed’s 2% goal.²

The underlying demand picture offered little comfort for advocates of a prolonged pause. Consumer spending rose 3.8% in the quarter, private domestic investment surged 19.4%, and real sales to private domestic purchasers increased 4.9%. Initial jobless claims also slipped to 194,000, signaling that layoffs remained exceptionally low.²

For the Fed’s defenders, some quarterly inflation measures eased and energy was a major driver of September’s jump. But the dissenter-friendly reading is more blunt: inflation has worsened while growth stays robust. Laura Ullrich of Indeed Hiring Lab called it “a waiting game” and said a December hike looked “very, very high” in probability.¹ The Fed’s bet on time now depends on the next data proving its patience right.