Kevin Warsh's Fed held rates steady, but two officials wanted a hike and traders now see an 85% chance of one in December

The Federal Reserve did what markets expected on Wednesday and left interest rates alone. What it said around the decision pushed traders further toward a rate increase in December.

The Federal Open Market Committee kept the federal funds target range at 3.75% to 4%. The vote was 10-2. Governor Lisa Cook and Cleveland Fed President Beth Hammack dissented, both preferring to raise rates by a quarter point at this meeting, according to the Fed's statement.

The statement upgraded the Fed's view of the economy, saying activity is "expanding at a strong pace" and that "productivity growth is strong, and capital investment is robust." It also said plainly that "inflation remains elevated" and ended with a new line: "The Committee will deliver price stability."

What Warsh said

At his press conference, Chair Kevin Warsh said the committee spent most of its two days on the inflation side of its mandate.

"It's our responsibility to get inflation down." - Kevin Warsh, Fed chair, at his Oct. 28 press conference, according to the Fed's transcript

Warsh noted that Americans have dealt with inflation above the Fed's 2% target for close to six years, while calling job conditions "quite positive." He said first-half GDP growth was revised up to 2.4% from 1.8%, and that third-quarter growth was likely running above 3%, according to the transcript.

"Broadly, what I heard in the room the last couple of days is consistent with my own views, which is the economy is strong," he said, according to CNBC.

He also announced a change to how the Fed meets. Starting in 2027, one of the eight annual meetings will focus only on broad monetary policy strategy, and in 2028 two will, leaving six for setting rates, CNBC reported.

Markets: higher, but not by much

Stocks swung through the decision and the press conference before closing higher. The S&P 500 rose 21.37 points, or 0.28%, to 7,743.97, according to Reuters. The Dow Jones Industrial Average added 97.53 points, or 0.19%, to 52,475.10, and the Nasdaq Composite gained 72.04 points, or 0.27%, to 26,549.85. Yahoo Finance data matched those closes, with the S&P 500 a cent higher at 7,743.98.

"The Fed didn't throw any curveballs," Ryan Detrick, chief market strategist at Carson Group, told Reuters. "It was widely expected they'd hold, so no big surprise there."

Breadth was close to even. Advancing issues outnumbered decliners by 1.05-to-1 on the NYSE, Reuters said. The Cboe Volatility Index fell 3.48% to 16.91, according to Yahoo Finance data.

December comes into focus

Futures now price an 85.0% chance of a quarter-point hike at the Fed's December meeting, up from 78.3% on Tuesday, according to CME's FedWatch tool as cited by Reuters. CNBC put the figure at 85.7%. The next meeting is Dec. 9, CNBC said.

Bond yields rose after the decision. The 10-year Treasury yield ended the day at 5.05%, up from 4.99% on Tuesday, according to Treasury Department data. Yahoo Finance's 10-year index closed at 5.04%. The 2-year yield ended at 4.67%, down from 4.70%, by the same Treasury data, so the gap between short and long rates widened.

The Fed was not the only central bank in the headlines. The Bank of Canada raised rates for the first time in three years on Wednesday, Reuters reported.

Oil climbs on a Saudi refinery strike

Energy kept the inflation worry alive. West Texas Intermediate for December settled $2.88 higher at $102.78 a barrel, according to Newsquawk. Satellite imagery reported by Iran's Fars agency indicated significant damage to the main refining unit at Saudi Arabia's 550,000-barrel-a-day Ras Tanura refinery after a strike claimed by Yemen's Houthis, Newsquawk said, though Saudi Arabia had not confirmed it.

Gold moved the other way. Spot gold fell 0.5% to $4,039.39 an ounce by 3:12 p.m. EDT, and December gold futures settled 0.6% lower at $4,051.60, according to Reuters reporting carried by CNBC.

What comes Thursday

Thursday brings the Commerce Department's personal consumption expenditures report, which includes the Fed's preferred inflation gauge, and the first estimate of third-quarter GDP, Reuters noted. Investors will also react in regular trading to Alphabet's and Microsoft's results, released after Wednesday's close. About 200 S&P 500 companies have reported so far, and 84% have beaten estimates, according to LSEG data cited by Reuters.