4 minEconomy
Fed holds rates steady days before midterms as inflation runs hot
The Federal Reserve kept its benchmark rate at 3.75% to 4% on Wednesday, with two dissenters pushing for a hike as consumer prices climb.
The Federal Reserve left interest rates unchanged on Wednesday, six days before the midterm elections, even as inflation moves back toward the three-year high it reached in May. The Federal Open Market Committee voted 10-2 to keep its benchmark rate in a range of 3.75% to 4%, a decision that leaves borrowing costs where they stood after the central bank's September move.
Only Fed Governor Lisa Cook and Cleveland Fed President Beth Hammack dissented. In the Fed's statement, the two officials « preferred to raise the target range for the federal funds rate by 1/4 percentage point at this meeting. » Hammack's vote was widely anticipated, while Cook's was not. Previews had pointed to Hammack, Dallas Fed President Lorie Logan and Minneapolis Fed President Neel Kashkari as the likeliest dissenters, so Cook's position stood out in an otherwise routine tally.
The statement also changed its language on inflation. It now says that « the accumulation of more information will help the Committee determine the policy stance appropriate to ensure a timely return of inflation to the Committee's 2 percent goal. » That replaces September's wording, which said the month's hike would « support a timelier return » to the 2 percent target. The shift signals that policymakers are waiting for more data before committing to a path, rather than presenting the earlier increase as the start of a sequence. The statement closed with the same line as last month: « The Committee will deliver price stability. »
The decision follows the Fed's September rate increase, its first hike since 2023 and the first under Fed Chair Kevin Warsh, whom President Donald Trump appointed to the post. The move marked a notable turn after roughly two years without an increase, and it put the new chair's policy approach to its first real test. Warsh has declined to signal the central bank's next move. « I don't prejudge meetings, » he said earlier this month, a stance consistent with a committee that is weighing each new reading separately.
The Fed also gave a more optimistic reading of the economy. It described « economic activity is expanding at a strong pace, » after calling growth « solid » in September. That upgrade matters because it suggests the central bank does not see a slowdown forcing its hand. Prices, however, have kept rising since then. Consumer prices were up 3.7% from a year earlier in September, driven largely by gasoline, which makes energy costs the main drag on household budgets. Core inflation, which excludes food and energy, rose 2.6% and beat forecasts, indicating that price pressures extend beyond fuel.
Taken together, the vote and the revised statement show a central bank weighing persistent price pressures against an economy that remains strong, with at least two policymakers willing to tighten further. For voters heading to the polls in the coming days, the decision keeps monetary policy steady while leaving open the question of whether inflation will return to the 2 percent target without additional increases. The Fed's next meeting will be watched closely for any shift in that balance.
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