The Federal Reserve opted to keep <a 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," Fed officials said.
The benchmark rate serves as the Fed’s primary tool for stabilizing consumer prices, which have trended upward in recent months. This latest decision arrives less than a week before the midterm elections, a time when affordability remains a primary concern for voters. Former President Trump has long urged the Fed to lower borrowing costs.
Stubborn inflation
During a press conference following the decision, Fed Chairman Kevin Warsh noted that economic indicators are trending in the right direction, highlighting strong consumer spending, robust capital expenditures, and healthy overall economic growth.
However, he noted that <a too high" and admitted that the Fed has yet to successfully bring it under control.
“On the employment side of the Fed’s dual mandate, conditions are quite positive, and yet Americans, of course, are still dealing with inflation that has been running above the committee’s objective for close to six years,” he told reporters. “It’s our responsibility to get inflation down.”
Two dissents
Ten members of the Federal Open Market Committee, which determines <a We just came out of a heck of a family fight, a serious, sober discussion," Warsh said Wednesday. "I think we came to the right policy decision for this moment."
While Wall Street analysts and investors largely anticipated that the Fed would pause in October, many economists expect policymakers to raise rates during their final meeting of the year in December and again in 2027.
“The two hawkish dissents, the wording of the policy statement, and prior comments from officials all suggest the central bank will hike rates in December,” Michael Pearce, chief U.S. economist for forecasting firm Oxford Economics, said in an email following the Fed’s decision.
Samuel Tombs, chief U.S. economist at investment advisory firm Pantheon Macroeconomics, noted that financial markets are currently pricing in an additional 0.75 percentage points of tightening over the coming year as the Fed works to suppress inflation.
Warsh stays tight-lipped
Warsh declined to comment when asked if officials would raise rates at the Dec. 8-9 meeting, citing his general reluctance to signal future policy moves.
“A lot of things can happen, so I’m not going to be able to share with you my musings about what happens when this group gets together six weeks from now,” he told a reporter.
The Iran war has kept global energy prices elevated, complicating efforts to lower costs in the U.S. Last month, the Consumer Price Index climbed at an annual rate of 3.7%, while core inflation—which excludes volatile food and energy costs—rose 2.6% from the previous year. Both figures exceeded economist projections.
According to experts, steady consumer spending and solid economic growth are also creating upward pressure on prices, making the effort to tame inflation more difficult.
What does this mean for your money?
The federal funds rate, which represents the interest banks charge one another for overnight loans, impacts borrowing costs throughout the U.S. economy. Rate hikes can lead to more expensive bank loans, credit cards, and auto financing, while simultaneously increasing yields on savings accounts.
Although the Fed kept rates steady on Wednesday, consumers may still encounter rising borrowing costs. Matt Schulz, a chief consumer finance analyst at LendingTree, suggested that some loan rates could continue to rise as the holiday shopping season approaches.
“Even though the Fed is leaving rates alone this month, it might raise rates again at its last meeting of the year in December,” Schulz said in an email ahead of the Fed’s decision. “That is far from guaranteed, but it is something that Americans should be aware of. It means that the debt they run up during the holidays could get a little more expensive to pay off before the year ends, through no fault of their own.”
A surprise change
While the decision to maintain current rates was widely expected, Warsh surprised observers by announcing adjustments to the central bank’s meeting calendar.
Policymakers will continue to hold eight meetings per year. However, beginning in 2027, one of those sessions will be dedicated exclusively to monetary policy strategy and discussion, Warsh explained. During that specific meeting, the Fed will not issue a policy statement or vote on interest rates.
“Getting policy right involves assessing near-term developments at timely, regular and information-rich intervals,” he said. “But it’s equally important we reserve time and space as an intellectually diverse group for strategic deliberations, for thinking anew about big questions, looking out over longer time horizons, focusing, as I say, on the left side of the decimal point.”
