Fed Rate Hold Expectations Higher After Oct FOMC Meeting Minutes

The Federal Reserve released minutes from its October 28-29 FOMC meeting, revealing significant divisions among policymakers about the appropriate path for interest rates and widespread concern that inflation remains stubbornly above the 2% target despite recent rate cuts.

While the committee ultimately delivered a 25 basis point cut to bring rates to 3.75-4.00%, the internal debate was far more contentious than the final vote suggests.

Key Takeaways

• Many participants suggested it would likely be appropriate to keep rates unchanged for the rest of the year, signaling potential pause in December despite the committee’s 25 basis point cut in October
• Several participants assessed a December cut would be appropriate if the economy evolved as expected, highlighting the data-dependent nature of future decisions
• Almost all participants agreed to end balance sheet runoff (QT) on December 1 as reserves approach “ample” levels
• Inflation has moved up since earlier in the year and remains “somewhat elevated,” with upside risks still present
• Downside risks to employment have risen in recent months while job gains have slowed
• Tariffs are expected to put upward pressure on inflation in 2025 and 2026 according to staff projections
• The committee showed notable discord: Stephen Miran favored a larger 50 bps cut; Jeffrey Schmid wanted no cut at all

The statement that “many participants suggested that, under their economic outlooks, it would likely be appropriate to keep the target range unchanged for the rest of the year” represented a significant shift in tone from the September meeting, as it suggests a faction of the committee believes the Fed may have already done enough easing for 2025.

Link to official FOMC Meeting Minutes (October 2025)

Also, the transcript of the meeting noted that “many participants expected some additional pickup in core goods inflation over the next few quarters, driven in part by further pass-through of tariffs to firms’ pricing.”

Committee members also seemed divided on “subdued job growth and moderate GDP growth.” Some participants attributed this to advances in AI and technology boosting productivity while others saw it as a warning sign of potential broader weakness ahead.

Market Reactions

U.S. Dollar vs. Major Currencies: 5-min

The U.S. dollar, which had been cruising higher ahead of the release of the October FOMC meeting minutes, extended its climb when the report revealed that a handful of policymakers were already leaning towards keeping rates on hold.

The CME FedWatch Tool now projects a 67.2% chance of the central bank sitting on its hands next month versus 49.9% prior to the FOMC minutes.

However, gains against commodity currencies were limited, as profit-taking and a bit of risk appetite came in play towards the end of the session. The dollar erased most of its post-FOMC minutes gains versus AUD (-0.03%), NZD (+0.10%) and CAD (+0.19%). USD managed to sustain its bullish momentum against JPY (+0.28%) until early Asian market hours and also against GBP (+0.38%).