In brief
In the fourth‑day meeting of the Federal Open Market Committee, the Fed voted 10‑2 to keep the federal funds rate unchanged at 3.75‑4.00 percent. Chair Kevin Warsh warned that inflation remains too high and hinted at possible hikes later in the year. The decision comes days before the 2026 midterm elections and signals the Fed’s cautious stance amid robust growth and elevated inflation.
On Wednesday, Oct. 28, the U.S. Federal Reserve announced that it would keep its benchmark federal funds rate unchanged at a 3.75‑4.00 percent range, a pause that follows a 0.25‑point hike in September and comes just days before the November 3 mid‑term elections.
The Federal Open Market Committee (FOMC) upheld the target range with a 10‑2 vote, while two members, Cleveland Fed President Beth Hammack and Fed Governor Lisa Cook, voted for an immediate 25‑basis‑point increase. The decision reflected the committee’s assessment that, although the economy is growing strongly and capital spending remains robust, inflation is still “too high.”
“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,” the FOMC said in its statement.
In a press conference after the meeting, Fed Chair Kevin Warsh emphasized that maintaining ample reserves and price stability are central to the Fed’s mandate. He called inflation “too high” and warned that the committee could pursue additional rate increases later in the year if conditions warrant.
“It’s our responsibility to get inflation down,” Warsh said, adding that the accumulation of more information and data would guide the policy stance appropriate to ensure a timely return of inflation to the committee’s 2 percent goal.
The Fed’s split decision also highlighted differing views on the pace of tightening. While the majority of members opted for caution, Hammack and Cook expressed concerns that further easing could jeopardize the Fed’s inflation targets, especially in light of rising oil prices that have contributed to recent inflationary spikes.
In its statement, the Fed reiterated its commitment to “maintaining ample reserves in the banking system” and stated that the committee would “determine the policy stance appropriate to ensure a timely return of inflation to the Committee's 2 percent goal.” Warsh also announced a change in the Fed’s next‑year meeting schedule: the FOMC will hold eight meetings in 2027, with one focused exclusively on broad monetary policy strategy.
Market reactions were mixed on the day of the announcement. U.S. equities opened bullish, with the Dow Jones Industrial Average rising 97.53 points to 52,475.1, the S&P 500 up 21.38 points to 7,743.98, and the Nasdaq Composite gaining 72.04 points to 26,549.85. However, utilities and real estate sectors slid as investors weighed the potential for future tightening.
Internationally, the Fed’s decision lengthened the gap between U.S. and South Korean key interest rates to about one percentage point, according to a Yonhap report. Meanwhile, South Korean stocks opened slightly higher on Thursday, buoyed by expectations of strong Samsung Electronics earnings and the Fed’s pause in rate hikes.
Looking ahead, the Fed plans to rely on upcoming data—including employment reports and inflation prints—to shape its policy path. The committee’s projection of a possible rate hike in December reflects forecasters’ expectations of continuing inflationary pressure, but the decision to pause now suggests the Fed is prioritising a cautious approach until the economy’s trajectory becomes clearer.
The timing of the rate decision, in close proximity to the mid‑term elections, adds a political dimension to the Fed’s policy stance. Policymakers have stated that their focus remains on the economic fundamentals, but the electorate will likely scrutinise the Fed’s actions as part of the broader debate over fiscal and monetary policy ahead of the election.
