In brief
The Federal Open Market Committee decided to hold the federal funds rate at 3.75‑4.00 percent, a 10‑2 vote, citing strong growth but high inflation. Fed Chair Kevin Warsh warned that inflation remains too high and that the committee will continue to monitor conditions for further hikes. The decision was welcomed by equity markets, though some members expressed dissent for a lift.
The U.S. Federal Reserve left its benchmark federal funds rate unchanged at 3.75‑4.00 percent on Wednesday, a decision made during its FOMC meeting in New York, less than a week before the 2026 midterm elections, according to Xinhua and Yonhap.
The central bank’s policy statement highlighted the state of the economy, saying:
"Economic activity is expanding at a strong pace. While uncertainty remains elevated owing, in part, to geopolitical developments, domestic spending has been resilient. Productivity growth is strong, and capital investment is robust. Job gains have kept pace with the workforce, and the unemployment rate has changed little,"and added that inflation “remains elevated”.
During the two‑day meeting, 10 of the 12 FOMC members voted to keep the rate unchanged while two favored a hike; the outcome was a 10‑2 vote.
Fed Chair Kevin Warsh told a press briefing that inflation remains “too high” and agreed that rising energy prices could broaden price pressures:
"Energy and related prices have moved higher again in recent weeks, and our job is to ensure that relative price changes in some sectors do not broaden out across the economy,"
Warsh added that “it’s our responsibility to get inflation down” and that the committee’s policy would “ensure a timely return of inflation to the Committee’s 2 percent goal”. The statement further noted 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 percent goal.”
The FOMC also affirmed its policy of maintaining ample reserves in the banking system and reiterated that it would use incoming data to guide future actions. Warsh announced a schedule change for next year, specifying that the board would hold rate‑setting votes at seven out of eight meetings.
Market participants reacted positively, with the Dow Jones Industrial Average rising 97.53 points to 52,475.1, the S&P 500 gaining 21.38 points to 7,743.98 and the Nasdaq Composite adding 72.04 points to 26,549.85. Most S&P 500 sectors ended in positive territory, although utilities and real estate lagged.
Not all FOMC members agreed; Cleveland Fed President Beth Hammack and Fed Governor Lisa Cook dissented and favored a 25‑basis‑point rate hike.
The decision also widened the gap between U.S. and South Korean key rates, leaving the U.S. rate up to one percentage point higher, according to Yonhap.
Analysts noted that the pause sets the stage for another increase later this year, with Pacific Investment Management Co. predicting a quarter‑point rise in December. The Fed will assess two employment reports and one inflation print, including the November CPI, before its next meeting to decide whether to adjust policy further.
