This story will be updated with further details from the Fed’s October 2026 interest rate decision.
The Federal Reserve on Wednesday held its benchmark interest rate steady amid elevated inflation as policymakers opted to wait for additional economic data after hiking rates in September.
Fed policymakers voted 10-2 to leave the federal funds rate at its target range of 3.75% to 4%. The move follows a 25-basis-point rate hike in September, which was the central bank’s first interest rate increase since July 2023.
The Federal Open Market Committee (FOMC), the central bank’s panel responsible for monetary policy moves, noted that economic activity “is expanding at a strong pace” despite uncertainty that is in part due to geopolitical developments, with strong productivity growth and capital investment, while job growth has “kept pace with the workforce, and the unemployment rate has changed little.”
The FOMC statement added that inflation remains elevated and that 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 Committee will deliver price stability.”
There were two dissenters from the FOMC decision to leave interest rates unchanged – Cleveland Fed President Beth Hammack and Fed Governor Lisa Cook each voted in favor of hiking interest rates by 25 basis points.
Federal Reserve Chair Kevin Warsh said that policymakers go through a process of “interrogating reality” as they assess economic conditions at each FOMC meeting, adding that the process has been complicated by high levels of investment, a steady labor market and elevated inflation.
Warsh noted that the labor market conditions are “quite positive” on that side of the Fed’s dual mandate, which is to promote full employment, but added that on the price stability side of the mandate “Americans, of course, are still dealing with inflation that has been running above the committee’s objective for close to six years. It’s our responsibility to get inflation down.”
He explained that since the Fed hiked rates by 25 basis points in September, policymakers have seen that financial and credit conditions have tightened for some businesses and households “much as we would expect.”
Warsh added that market participants are “becoming somewhat more discerning in their capital allocations. And while overall financial conditions are tighter, I’m unwilling and unable to call them tight. But broadly, these developments go in the direction of achieving a longer, more durable period of economic growth and price stability.”
The Fed chair also offered an update in the FOMC’s review of its meeting schedule, saying that starting next year the FOMC will hold still hold eight meetings per year, but one of those meetings in 2027 “will focus exclusively on broad monetary policy strategy, with neither a vote on the federal funds rate nor a policy statement anticipated. The rest will be regular FOMC policy-setting meetings.”
Warsh added that in 2028 he expects the FOMC will have two meetings dedicated to strategy discussions, with six related to policy decisions.
“Getting policy right involves assessing near-term developments at timely, regular and information-rich intervals, 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,” he explained.
“I believe the setting of the meeting schedule and agenda is more than some administrative detail. It’s an institutional choice affecting the nature and the quality of our deliberations and ultimately, the wisdom of our decisions. It’s yet another change to get the conduct of monetary policy on the right track,” Warsh added.
Read the full article here
