Fed Holds Interest Rates Steady as Inflation Stays Elevated

The Federal Reserve held interest rates steady on Wednesday. It left its benchmark rate in a range of 3.75 to 4 percent.

The vote was 10 to 2. Governor Lisa Cook and Cleveland Fed President Beth Hammack dissented, preferring a quarter-point increase at this meeting.

The decision was widely expected. Markets had put the chance of a hold at about 90 percent ahead of the 2 p.m. announcement.

“Inflation remains elevated,” the Federal Open Market Committee said in its statement. “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. The Committee will deliver price stability.”

The statement upgraded its view of the economy, describing activity as expanding at a strong pace, up from “solid” in September. It said domestic spending has been resilient, productivity growth is strong, capital investment is robust, and job gains have kept pace with the workforce.

The hold follows a quarter-point hike in September, the Fed’s first increase since 2023. Since then, inflation has moved the wrong way for the central bank. Consumer prices rose 3.7 percent in the year through September, and producer prices jumped 6.3 percent over the same period.

Chair Kevin Warsh defended the pause at his afternoon press conference, saying the committee held to take stock because the period ahead should bring more clarity. He said there was overwhelming agreement among policymakers that the tightening so far is starting to work. He also announced a change to the meeting calendar: the Fed will keep eight meetings a year, but one meeting in 2027 will become a strategic discussion with no rate vote, rising to two in 2028, leaving six rate-setting meetings that year.

Not everyone thinks waiting was the right call. “It’s ‘wrong way,’” Dan North, a senior economist at Allianz Trade, said of the inflation data. “That inflation line is going up, not down.” Kelly Brown, chief executive of deposit management firm Ampersand, put it more bluntly: “A hold isn’t relief. It’s the Fed telling Main Street to wait.”

Pressure runs in the other direction too. President Donald Trump has argued the Fed should lower interest rates, not raise them. The two dissenters wanted the opposite: a hike now. The decision also lands less than a week before midterm votes are tallied on November 3, and North said a hike before the election would have looked suspicious.

Market reaction was muted. Stocks were mixed after the announcement, with the Nasdaq down 0.1 percent and the S&P 500 up 0.1 percent. The 10-year Treasury yield sat around 5.03 percent, and the 2-year yield rose to 4.776 percent. Traders still price roughly a 90 percent chance of a quarter-point hike in December, when the Fed holds its final meeting of the year.

Warsh pointed to Thursday’s data as the next test: third-quarter GDP and the September personal consumption expenditures price index, the Fed’s preferred inflation gauge, are both due before markets open.