The Fed Hiked Rates 12-0. Two Months Earlier, the Vote Was 9-3 Against It.

The Federal Reserve raised its benchmark interest rate a quarter point to a range of 3.75 to 4 percent on September 16, its first increase since 2023. Every member of the Federal Open Market Committee voted yes. Eight weeks earlier, the same committee had voted 9 to 3 to leave rates alone, and the three no votes came from officials who wanted this exact increase in July.

The dissent that got outvoted, then adopted

Beth Hammack, president of the Federal Reserve Bank of Cleveland, Neel Kashkari of the Minneapolis Fed and Lorie Logan of the Dallas Fed dissented at the July 29 meeting, each preferring to raise the target range a quarter point immediately rather than hold it at 3.5 to 3.75 percent. The Fed's statement that day still called inflation elevated, citing supply shocks that had pushed up prices in certain sectors, including energy. Core PCE inflation, the Fed's preferred gauge, ran at 3.4 percent in May, well above the central bank's 2 percent target.

“I asked for a good family fight, and I got one.”

It was the most opposition a Fed chair has faced this early in a tenure since 1970, according to dissent records kept by the St. Louis Fed. Arthur Burns took three dissents at his first meeting that February, and Paul Volcker took two at his first and four at his second. Jerome Powell, by contrast, went 11 meetings before facing his first dissent in 2019. Two months after Warsh got the fight he said he wanted, the three officials who lost 9-3 became the entire committee, 12-0.

A chair who will not fill in his own dot

Warsh has left his own projection blank on the Fed's Summary of Economic Projections, the quarterly chart known as the dot plot, at both meetings he has chaired: his first in June and again on September 16. Eighteen other policymakers still submitted dots in June. Nine projected at least one more hike by year end and nine projected rates unchanged or lower, a split that resolved, three months later, into a unanimous vote for the hike.

“The exercise isn't useful for conducting policy.”

Warsh has also proposed cutting the FOMC's meeting schedule from eight sessions a year to six, arguing it would let more data accumulate between decisions. The committee discussed the idea in July and reached no conclusion. A year-end review of the Fed's communications tools, including whether the dot plot survives at all, is underway, though it has not concluded and no vote to end the practice has been scheduled. Janet Yellen said in 2014 that the dots were never meant to be the Fed's main signal, and Jerome Powell routinely downplayed them, so Warsh's skepticism is not new, only his choice to act on it by leaving his own dot off the page.

What moves next, and what is still a guess

The rate increase adds to borrowing costs that were already climbing. The 30-year mortgage rate reached 6.95 percent this month, its highest level in more than a year and a half, and the 10-year Treasury yield topped 5 percent. Bank of America economists forecast that gross domestic product will grow at a 3 percent annual rate in the third quarter, a projection built on data available before the September meeting, not a confirmed number.

Fed officials' own dot plot points to at least one more quarter-point increase before year end, with a second possible if inflation data due out over the next two months does not improve. None of that is decided. The same committee that voted 9-3 in July voted 12-0 in September, and the chair still will not say, on paper, where he thinks it stops.