US-Iran Talks Signal Potential De-escalation as Policy Divisions Emerge Within the Fed

Daily News

Summary:

Fed Chair Kevin Warsh says the number of meetings involving interest rate votes will be reduced; US Vice President JD Vance reaches out to senior Iranian official Rezaei in an attempt to revive peace talks.

Headlines

1. Iran Could Respond to Qatar's New Proposal as Early as Thursday

2. Israeli Election Commission Releases Preliminary Count of Special Ballots That Could Affect the Final Election Outcome

3. Fed Chair Kevin Warsh Says the Number of Meetings Involving Interest Rate Votes Will Be Reduced

4. US Vice President JD Vance Reaches Out to Senior Iranian Official Rezaei in Bid to Revive Peace Talks

5. Bank of Canada Raises Rates by 25 Basis Points, Says Further Hikes May Be Necessary

Detailed

Iran Could Respond to Qatar's New Proposal as Early as Thursday

According to Israeli news outlet i24NEWS, Qatar is awaiting Tehran's response to a new proposal, which Iran could deliver as early as Thursday.

Two regional diplomats said the current proposal would require Iran to take concrete steps regarding its nuclear program. In return, the United States would ease some sanctions and unfreeze certain funds. One measure under consideration is the resumption of inspections of Iranian nuclear facilities by International Atomic Energy Agency (IAEA) inspectors.

So far, a key obstacle to US-Iran negotiations has been the sequencing of concessions. Iran insists that the blockade be lifted and sanctions eased to some extent before nuclear issues are discussed. The Trump administration, however, demands that Iran take action on its nuclear program during the first phase of negotiations.

A senior US official told i24NEWS that the United States would not attack Iran before the midterm elections under any circumstances.

Israeli Election Commission Releases Preliminary Count of Special Ballots That Could Affect the Final Election Outcome

On October 28 local time, Israel's Central Elections Committee announced that the number of special ballots requiring a double-envelope procedure in this year's parliamentary election was estimated at between 430,000 and 480,000, below the approximately 600,000 reported previously.

The committee said these ballots were cast primarily by Israeli military personnel, prisoners, diplomats serving abroad and other voters unable to reach their designated polling stations.

To prevent duplicate voting, election officials will count these ballots separately after verifying voters' identities and confirming that they have not voted elsewhere.

The figures released so far remain preliminary and may change as ballots continue to be received and processed. In Israeli politics, roughly every 40,000 votes can determine one seat in the Knesset. As a result, these special ballots, which are counted later, can play a decisive role in determining party seat totals and potentially shaping coalition formation.

Fed Chair Kevin Warsh Says the Number of Meetings Involving Interest Rate Votes Will Be Reduced

At its latest policy meeting in October, the Federal Reserve kept the federal funds rate target range unchanged at 3.75%–4.00%, in line with market expectations. Two officials dissented from the decision: Fed Governor Cook and Cleveland Fed President Hammack, who favored a 25-basis-point rate increase.

Fed Chair Kevin Warsh said eight meetings a year remained appropriate for the Federal Open Market Committee (FOMC). However, one meeting next year would be dedicated specifically to the Fed's broader monetary policy strategy. No vote on the federal funds rate would take place at that meeting, and no policy statement would be issued.

Warsh also noted that, following the Fed's decision to raise rates by 25 basis points at its September meeting, there were signs that financial conditions had tightened for some businesses and households. Market participants were also becoming more cautious in their capital allocation decisions.

Nevertheless, he said he would not characterize overall financial conditions as restrictive. Instead, he argued that current conditions were helping pave the way toward price stability.

Warsh reiterated the Fed's commitment to bringing inflation down to 2%, specifying that the target is measured by the personal consumption expenditures (PCE) price index. He said additional information would help the FOMC assess the appropriate policy stance and that no firm conclusion had yet been reached on the monetary policy outlook.

US Vice President JD Vance Reaches Out to Senior Iranian Official Rezaei in Bid to Revive Peace Talks

US officials and people familiar with the matter said Vice President JD Vance was in contact with Rezaei, secretary of Iran's Supreme National Security Council, in an effort to revive peace negotiations.

On Wednesday, President Donald Trump acknowledged that he had agreed to Vance engaging with the Iranian side but denied instructing the vice president to restart peace talks. Trump said the letter primarily concerned the provision of medical supplies to Iran.

Separately, Axios reported, citing US, Israeli and regional sources, that Qatar and other countries were pressing Iran to allow United Nations inspectors to examine nuclear facilities that had been attacked. In exchange, the United States would partially ease sanctions, allow Iranian oil sales and release some frozen funds.

US and Israeli officials said that if negotiations failed, Washington and Jerusalem could launch a week-long, large-scale military campaign against Iran after the US midterm elections. Potential targets could include Iran's leadership, energy infrastructure, nuclear facilities and other critical infrastructure.

Bank of Canada Raises Rates by 25 Basis Points, Says Further Hikes May Be Necessary

The Bank of Canada raised its policy rate by 25 basis points to 2.50%, in line with market expectations, and said another increase might be necessary.

The central bank said its Governing Council had agreed to proceed cautiously given the many uncertainties facing the economy. Persistently high energy prices and stronger cost pass-through were making the inflation outlook more persistent.

According to the policy statement, the rate increase was intended to reduce the risk that elevated energy prices would feed through more broadly into the prices of other goods and services. Longer-term inflation expectations remained firmly anchored, while a range of indicators continued to point to some excess supply in the economy.

The Bank also noted considerable uncertainty surrounding the economic growth outlook, particularly in relation to trade ties with the United States.

Governor Tiff Macklem said the main argument for raising rates was that energy prices had already increased and were expected to remain elevated, while cost pressures continued to build. The Governing Council believed there was now less room for monetary policy to provide accommodation.

The Bank had also considered leaving rates unchanged. The main arguments for holding off on a hike were that rising inflation was concentrated primarily in energy, the economy still had spare capacity, and tariff disputes with the United States would weigh on economic growth.

The Governing Council unanimously agreed to make decisions on a meeting-by-meeting basis, taking the circumstances at each meeting into account.

Today's Economic Calendar

18:00 (UTC+8) Eurozone October Economic Sentiment Indicator

20:30 (UTC+8) US September PCE Price Index

21:15 (UTC+8) European Central Bank October Interest Rate Decision

21:45 (UTC+8) ECB President Christine Lagarde Holds Monetary Policy Press Conference

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