Fed holds rates steady, signals possible future hikes as inflation stays elevated
The US Federal Reserve held its benchmark interest rate steady at 3.75%-4.00% on Wednesday, delaying any changes until after next week's midterm elections. The central bank upgraded its economic assessment to "strong" while acknowledging inflation remains elevated above its 2% target, hinting at pos
The Federal Reserve held interest rates steady on Wednesday, as expected, opting to delay any changes to borrowing costs until after next week's US midterm elections and awaiting further data on the path of inflation.
In a 10-2 decision, the US central bank said it would maintain its benchmark interest rate within the current 3.75%-4.00% range while acknowledging that inflation "remains elevated," upgrading its assessment of the economy, and hinting that further rate hikes may be coming depending on the performance of inflation.
"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% goal," the rate-setting Federal Open Market Committee said in its latest policy statement. "The Committee will deliver price stability."
Fed Governor Lisa Cook, currently targeted by President Donald Trump for removal from the central bank, dissented in favour of a quarter-percentage-point rate hike, as did Cleveland Fed President Beth Hammack, a consistently hawkish voice who also dissented in July for the same reason.
The Fed's latest policy statement is a notable change from the 15-16 September meeting, with a hint of the sort of forward guidance Fed Chairman Kevin Warsh has said he wants to avoid. The Fed's assessment of the economy was upgraded to "strong" from the "solid" expansion seen as of the September meeting, while investment was still viewed as robust and job gains were keeping pace with the workforce.
The outcome of this week's meeting was widely expected after top Fed officials indicated they saw no rush to raise rates again following the quarter-percentage-point increase approved last month, despite inflation data in the meantime that was stronger than forecast and concerns that price pressures are broadening across the economy. Energy costs remain high, including for diesel fuel, which is a key input for shipping, agriculture, and other industries.
Warsh will hold a press conference at 2:30 p.m. EDT (1830 GMT) to elaborate on the policy decision and economic outlook. Investors expect further rate hikes will be needed, beginning in December and continuing into 2027, to lower inflation that is currently around a percentage point above the Fed's target and has shown little progress in recent months. The US central bank has missed its inflation target for five and a half years, a fact that has left some officials worried that businesses and households are becoming accustomed to faster price increases and may plan for them in ways that will make inflation harder to control.