Federal Reserve holds interest rates steady in face of persistent inflation

Federal Reserve officials held interest rates steady Wednesday despite stubborn inflation.

The central bank's Federal Open Market Committee (FOMC) voted 10-2 to keep the benchmark federal funds rate range at 3.75 percent to 4 percent.

Fed board of governors member Lisa Cook and Federal Reserve Bank of Cleveland's president Beth Hammack dissented in favor of a quarter-point increase. Hammack also backed a rate hike in late July, joining two of her colleagues in the minority when the central bank kept rates steady.

Wednesday's decision came six weeks after officials raised rates by a quarter point, the first hike in more than three years. Inflation has risen this year amid the Iran war, creating a difficult set of circumstances for President Trump and the GOP this midterm cycle.

Traders were overwhelmingly anticipating a hold, pricing in a 90.6 percent chance of the FOMC keeping rates steady as of earlier Wednesday, according to the CME FedWatch tool.

Investors expected a hold despite inflation remaining above the Fed's 2 percent target for five and a half years.

Annual inflation, based on the consumer price index, rose from 3.4 percent in August to 3.7 percent in September. Energy shocks from the U.S.-Iran and Russia-Ukraine wars continue to hamper the economy, as gas prices in September experienced their highest monthly jump since March.

Multiple Fed officials, though, recently stressed the need to patiently evaluate economic data — a sign they were willing to punt the next rate hike to early December, when the FOMC will meet for the last time in 2026.

The FOMC said in announcing Wednesday's hold that the "accumulation of more information will help" it "determine the policy stance appropriate to ensure a timely return" to 2 percent inflation.

Ted Rossman, a finance analyst at Money Management International, said a quarter-point increase in early December "seems very likely."

"Inflation remains uncomfortably high, and the rising cost of living and elevated interest rates are combining to squeeze household budgets," he told The Hill via email.

Last month, 12 of 18 FOMC officials forecast one more rate hike this year in addition to September's quarter-point increase, according to the committee's quarterly economic projections.

"The Fed has time on its side. Inflation expectations remain anchored and second-round effects are limited, giving policymakers room to wait for more data," Seema Shah, the chief global strategist at Principal Asset Management, said this week.

Shah added she expects the central bank to hike rates in December and again in "early 2027."

Updated at 2:33 p.m. EDT

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