A prominent economist is scratching his head after President Donald Trump's Fed chair decided to sit on a move markets expect anyway.
Economist Justin Wolfers said he was "a little puzzled" after the Federal Reserve held interest rates steady Wednesday, writing in his Platypus Economics newsletter that the central bank under Chair Kevin Warsh appears to be putting off a rate hike it already knows it needs.
Markets see better-than-80 percent odds of a hike at the Fed's December meeting, Wolfers noted, meaning Wednesday's real decision was most likely a six-week delay.
Warsh argued the Fed wants to see how September's rate hike works its way through the economy, saying the "monetary medicine" is starting to work. Wolfers wasn't buying it.
"Why put off till tomorrow what you can do today?" he wrote.
Every major price gauge still starts with a three, Wolfers pointed out, while the Fed's target is two. The Fed's preferred measure climbed 3.4 percent over the year through August, and consumer prices rose 3.7 percent over the year through September.
Rate hikes are "slow-acting medicine" that take months to kick in, he explained, and September's increase was only six weeks old. "Watching to see if medicine this slow works on a first dose increases the risk that the second dose comes too late," Wolfers wrote.
He also flagged the calendar. The Fed's next meeting "falls conveniently after the election," Wolfers wrote, though he stopped short of accusing Warsh of playing politics and called the pause "defensible" if it rests on a coherent theory that high energy prices are a temporary blip.
"If instead this is monetary policy driven by hope...then count me as unconvinced," he wrote.
Two officials broke with the decision. Cleveland Fed President Beth Hammack dissented in favor of a hike, and Fed Governor Lisa Cook cast her first dissent, Wolfers noted, a week before a panel picked by Trump weighs his bid to fire her.
Wolfers also took aim at Warsh's plan to cut the number of rate-setting meetings from eight a year to six by 2028, calling it "a radical change" that risks leaving monetary policy "running months behind the economy."
"The courageous move would have been to do it today," he concluded.