The Fed held at 3.75%–4.00% — and two officials voted to hike. December is now 85% priced

Mitrade Insights — The Federal Reserve kept its target range at 3.75%–4.00% on Wednesday, but the vote was 10–2 and both dissenters wanted a 25 basis point hike. Governor Lisa Cook and Cleveland Fed President Beth Hammack broke with the majority. Chair Kevin Warsh refused to offer forward guidance or a dot plot, and the market did something that looks contradictory: it raised the odds of a December hike to 85%–87% while the 2-year Treasury yield fell 8 basis points to 4.70% and the dollar slipped to 101.84.

* Chart source: TradingView (US Dollar Index, Capital.com).

The headline is the hold. The story is the vote. Hammack's dissent was expected — she had already voted for tighter policy in April and July. Cook's was not. A Board governor breaking with the Chair carries more weight than a regional president doing so, and this was her first dissent since joining the Board. It tells you the hawkish bloc is no longer confined to the usual district presidents.

Why the 2-year fell 8bp

Because the market had priced a more hawkish hold than it got. Warsh said the Committee would "deliver price stability" and described activity as expanding at a "strong pace", but he explicitly declined to guide the market toward December and did not submit a dot-plot projection. He also announced that the Fed will cut its rate-setting meetings from eight to seven a year from 2027, and to six from 2028. In a market that wanted a clear "December is live" signal, the absence of one was read as a small dovish surprise at the front end. The 2-year fell to 4.70%; the 10-year stayed at 5.045%.

The dollar at 101.84

The dollar index had run to the 102.50 area in mid-October. It closed Wednesday at 101.84, below that ceiling. That is not a collapse; it is a market that has already priced a lot of tightening and is unwilling to add before it sees the data. The levels are simple: 102.50 is the October high, 101.50 is the pivot of the October range, and 100.00 is the round-number support.

The December debate now hinges on two numbers due at 08:30 ET today: Q3 GDP and September core PCE. Consensus is for GDP at 3.1% annualised, up from 2.2% in Q2, and core PCE at +0.3% m/m and +3.1% y/y, up from 3.0%. Headline PCE is expected at +0.5% m/m and +3.7% y/y. A hot core print would validate the two dissents and push December odds toward 90%; a soft one would revive the "one and done" argument.

BoC hiked, ECB holds, BOJ waits

The dollar is also being priced against its peers. The Bank of Canada hiked 25bp to 2.50% on Wednesday, its first increase in more than three years. The ECB is expected to hold at 2.50% today, with December hike odds near 84%. The Bank of Japan is expected to hold at 1.25% on Friday. If the Fed pauses while the BoC hikes and the ECB keeps a tightening bias, the dollar's rate differential stops widening — that is the bear case for the dollar, and the bull case for gold.

The bull case: two dissents, core PCE at 3.1%, GDP at 3.1%, December at 85%, and a terminal rate debate moving toward 4.25%–4.50%. The dollar holds 101.50 and retests 102.50.

The bear case: the 2-year has already turned, Warsh has removed forward guidance, the meeting calendar is being cut, and the Fed is closer to the end of the cycle than the start. A soft core PCE print sends the dollar through 101.50 and opens 100.00.

Neither side gets a clean win before 08:30 ET. That is the point of a 10–2 hold: the vote tells you the direction of the debate, not the outcome.