Fed holds rates at 3.75%–4% in final meeting before midterms
The Federal Reserve left its benchmark rate unchanged after September's first hike since 2023, with two of 12 members dissenting in favor of a quarter-point increase.
What you need to know
The Federal Reserve kept its benchmark rate at a 3.75% to 4% range at its last meeting before the midterms, following September's first rate increase since 2023. Ten members supported the pause; two favored a quarter-point hike, according to the Fed.
- The Fed left its benchmark rate unchanged at a 3.75% to 4% target range
- Ten of 12 members voted to hold; two dissented in favor of a quarter-point increase
- September's increase was the first since 2023, prompted by rising inflation
- Annualized inflation has stayed above the Fed's 2% target and was 3.7% in September
What the Fed decided
The Federal Reserve held its benchmark interest rate steady on Wednesday, keeping the federal funds target range at 3.75% to 4%. The decision came at the central bank's final scheduled meeting before the midterm elections, leaving rates at one of the highest pre-election levels in more than 20 years, according to the Guardian.
Ten of the 12 voting members supported the pause. Two, Fed Board Governor Lisa Cook and Cleveland Federal Reserve Bank President Beth Hammack, preferred to raise rates by a quarter percentage point, CBS News reported. In its statement, the Fed said gathering more information would help it judge the policy stance needed to return inflation to its 2% goal.
Inflation and the September hike
The pause follows September's quarter-point increase, the first since 2023, which Fed officials attributed to rising inflation. Annualized inflation has remained above the Fed's 2% target for most of the year, and the Consumer Price Index rose at a 3.7% annual rate in September, up from 3.4% in August. Core inflation was 2.6%. Both measures exceeded economists' expectations.
President Donald Trump criticized September's increase, saying US interest rates should be 1% or less. Fed Chair Kevin Warsh said at the September meeting that the central bank cannot affect individual prices, such as oil or groceries, but can work to prevent relative price changes from spreading through the economy.
What comes next
Economists cited by CBS News expect further tightening. Michael Pearce of Oxford Economics said the dissents and statement wording point to a December hike, while Samuel Tombs of Pantheon Macroeconomics said markets are pricing in 0.75 percentage points of additional tightening over the next year. These are forecasts, not Fed commitments.
The decision lands less than a week before midterm elections in which the economy has been the top issue for voters in multiple polls. Higher borrowing costs affect credit cards, mortgages and some savings accounts.
Why did two Fed members dissent from the October decision?
Lisa Cook and Beth Hammack voted against the pause because they preferred raising the benchmark rate by a quarter percentage point, according to CBS News. The other ten voting members supported holding rates steady.
Sources & context
- Fed holds interest rates steady in last decision before midterms ↗The Guardian
- Fed holds interest rates steady even as inflation remains high ↗CBS News
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