Fed Opens High-Stakes Meeting as Inflation Tests Policy Path

The Federal Open Market Committee opened a high-stakes closed-door meeting at 9:30 a.m. ET on October 27 to discuss interest rates and its policy statement. An official announcement is due October 28 at 2:00 p.m. ET. Crypto and traditional markets are already trading on Wall Street expectations for rates. The Federal Reserve faces a difficult inflation problem. The Consumer Price Index is at 3.7% and the Core PCE Price Index at 3.0%, both above the 2.0% target. Average 30-year fixed mortgage rates recently reached a three-year high of 7.4% before easing to 7.32%. High rates are drawing public pushback. With six days until the US midterm elections, voter attention is fixed on affordability. This is also the fourth meeting under Fed Chair Kevin Warsh, and observers are watching for signs of his independence from political control. Wall Street sees a 93% chance the Fed will keep the benchmark rate at 3.75%–4.00%, according to the CME FedWatch Tool. Deutsche Bank and other major firms expect that pause to be brief. They see Warsh signaling a likely 25 basis point hike in December to contain inflation. Odds of a hawkish shift are 75.1%, against 24.9% for prolonged neutrality. With rates expected to stay flat, the S&P 500 rose 0.6% and the Nasdaq Composite gained 1.18%. The 10-year Treasury yield slipped to 4.979% after earlier crossing 5%. The 2-year yield fell from a morning high of 4.735% to 4.703%. Bitcoin gained 1.05% on the day and reclaimed $80,000. Bitcoin shows an 88% correlation with both the S&P 500 and gold, pointing to rates-driven momentum.