Markets Bet the Fed Will Hold in October as Warsh Declines to Signal Next Move

The Federal Reserve's policy committee is scheduled to hold a two-day meeting on Oct. 27 and 28, according to the Fed's official calendar. Heading into it, investors are largely positioned for no change in interest rates — though the central bank's chair has been careful not to confirm that view.

Speaking at an International Monetary Fund event in Bangkok on Friday, Oct. 16, Fed Chair Kevin Warsh said he was not signaling a decision one way or the other, CNBC reported. Futures markets nonetheless assigned roughly a 15% probability to an October rate hike as of that morning, according to the same report.

Why the signals are harder to read

For years, investors treated public remarks by the Fed's vice chair and the president of the New York Fed as reliable proxies for the chair's thinking. In recent weeks, Vice Chair Philip Jefferson and New York Fed President John Williams have both indicated they see little urgency in raising rates, CNBC reported, and markets repriced toward a hold.

But Warsh has repeatedly rejected the convention of telling markets what the committee plans before it meets. That leaves open the possibility, argued in CNBC's analysis, that investors are underpricing the chance of a hike if the chair chooses to lean on recent inflation data.

What to watch

• The policy statement and any press conference after the Oct. 28 decision.
• Whether the statement characterizes recent rate increases as complete or ongoing.
• Minutes from the September meeting, released Oct. 7, for context on the committee's debate.

The next meeting after October is scheduled for Dec. 8–9 and is associated with a new Summary of Economic Projections, according to the Fed's calendar.