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Federal Reserve interest rate policy

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The Federal Reserve opted to hold its benchmark interest rate steady at its October policy meeting.From: Federal Reserve Holds Benchmark Interest Rate Steady at 3.75 to 4 Percent Ahead of Midterms

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On October 28, the Federal Reserve maintained its benchmark interest rate at 3.75 to 4 percent. The central bank opted against a rate hike, keeping borrowing costs for mortgages and credit cards at their current elevated levels heading into the winter.

The decision balanced a recent rebound in consumer inflation against two months of softening job growth.

How the story developed

On September 3, Federal Reserve Governor Christopher Waller indicated he favored holding the federal funds rate steady at 3.50 to 3.75 percent for the month. Waller argued that opaque "nonmarket services" were artificially inflating core personal consumption expenditures readings, accounting for 51 percent of the recent core increase.

Waller stated that underlying inflation was closer to the central bank's 2.0 percent target than the 2.6 percent headline figure suggested at the time. He noted that a September pause would be contingent on the upcoming August inflation report not showing an unexpected surge.

The benchmark interest rate remains at its highest plateau in over two decades.From: Federal Reserve Holds Benchmark Interest Rate Steady at 3.75 to 4 Percent Ahead of Midterms ·

By October 27, the Federal Reserve was widely anticipated to leave its benchmark interest rate unchanged and pause its tightening campaign. Policymakers weighed signs of a cooling labor market against an acceleration in consumer prices, with headline inflation rebounding to 3.7 percent in September due to rising shelter and energy costs.

The timing of the October meeting arrived just days before the United States midterm elections, adding political pressure to the central bank's messaging. Traders closely watched for forward guidance that could signal future rate movements.

Consumer borrowing costs for mortgages and credit cards remain elevated despite the October rate pause.From: Federal Reserve Holds Benchmark Interest Rate Steady at 3.75 to 4 Percent Ahead of Midterms ·

What to watch

  • Whether the central bank will consider resuming rate hikes at its December gathering.

Where things stand

  1. Two Fed Officials Dissent in 10-2 Vote, Backing Quarter-Point Rate Hike

    Key point: Two Federal Reserve officials dissented from the central bank's decision to hold interest rates steady, advocating instead for a quarter-point hike.

    The Federal Reserve's decision to keep its benchmark interest rate steady was not unanimous. Two of the 12 Federal Open Market Committee voters dissented from the hold, favoring a quarter-point rate hike instead.

    Governor Lisa Cook and Cleveland Fed President Beth Hammack cast the dissenting votes in the 10-2 decision. The split vote highlights internal divisions as the central bank navigates persistent inflation concerns.

    Sources:

Charts, maps and images

The benchmark interest rate has remained at a multi-year high throughout 2026.From: Fed Expected to Hold Rates Steady at October Meeting as Inflation Rebounds to 3.7% ·
Shelter and energy costs were the primary drivers behind the September inflation acceleration.From: Fed Expected to Hold Rates Steady at October Meeting as Inflation Rebounds to 3.7% ·
Bond markets have experienced significant volatility as traders recalibrate rate expectations.From: Fed Expected to Hold Rates Steady at October Meeting as Inflation Rebounds to 3.7% ·
Nonmarket services account for roughly half of the recent increase in core PCE.From: Fed Governor Waller Signals September Rate Hold, Citing Skewed Nonmarket Services Inflation ·
Illustration: The central bank's decision arrives just days before voters cast their ballots in the US midterm elections.From: Federal Reserve Holds Benchmark Interest Rate Steady at 3.75 to 4 Percent Ahead of Midterms ·
Policymakers will reconvene in December to determine whether further monetary tightening is necessary.From: Federal Reserve Holds Benchmark Interest Rate Steady at 3.75 to 4 Percent Ahead of Midterms ·
Show 2 more
Policymakers must balance the fight against inflation with the risk of overtightening the economy.From: Fed Expected to Hold Rates Steady at October Meeting as Inflation Rebounds to 3.7% ·
The FOMC will meet later this month to determine whether to hold the federal funds rate steady.From: Fed Governor Waller Signals September Rate Hold, Citing Skewed Nonmarket Services Inflation ·

Timeline

October 2026

  1. Federal Reserve Holds Benchmark Interest Rate Steady at 3.75 to 4 Percent Ahead of Midterms
    1. Two Fed Officials Dissent in 10-2 Vote, Backing Quarter-Point Rate HikeKey point: Two Federal Reserve officials dissented from the central bank's decision to hold interest rates steady, advocating instead for a quarter-point hike.
  2. Fed Expected to Hold Rates Steady at October Meeting as Inflation Rebounds to 3.7%

September 2026

  1. Fed Governor Waller Signals September Rate Hold, Citing Skewed Nonmarket Services Inflation