Hold the confetti: the Federal Reserve is expected to do absolutely nothing today, even though inflation just got hotter. That means your mortgage, car loan and credit card rates probably stay put, but this Fed rate decision may not be the last one you hear about this year.
The Fed wraps up its two-day meeting Wednesday, Oct. 28. The statement is due at 2:00 PM ET, followed by Chair Kevin Warsh’s press conference at 2:30 PM ET. It’s the last decision before the midterm elections.
Fed Rate Hold: What the Markets Expect
Traders aren’t sweating it. The CME FedWatch tool shows a 90.6% probability that the Fed keeps its target range at 3.75% to 4%. CNBC reports that fed funds futures price less than a 10% chance of another hike this week.
That 90.6% is a market-implied probability, not an official forecast, and it moves all day. Still, it’s about as close to a sure thing as Wall Street gets (bring a snack, not a panic). For more on how Wall Street is positioning, see our look at why the hold is priced in and December is the real worry.
Why Hold When Prices Are Climbing?
Here’s the thing: the Fed is holding while inflation heads the wrong way. A pause on rates is not a pause on prices, and your grocery and gas bills know it.
September’s consumer price index rose 3.7% from a year earlier, up from 3.4% in August. Prices rose 0.6% in a single month. Economists had expected 3.6%.
Energy did the damage. Gasoline jumped 9.1% in September alone, according to Advisor Perspectives. Strip out food and energy, and core inflation looks calmer at 2.6%, up from 2.4% in August. The Fed’s target is 2%.
So the problem is at the pump, but it’s also showing up everywhere else. The Fed already hiked by a quarter point on Sept. 16, by a 12-0 vote, its first increase since 2023. Pausing now gives the central bank time to see whether that hike is working.
The Midterm Elephant Behind the FOMC Decision
Officials insist politics doesn’t drive policy. Fox Business notes, though, that the Fed can be hesitant to move right before an election. Deutsche Bank analysts said the central bank might prefer to avoid headlines about raising rates just before a midterm vote focused on affordability, AOL reports.
That fits what voters are saying. Rising prices, especially housing and energy, top their list of worries. Control of the House and Senate is on the line next Tuesday, just six days out as AI-fueled political ad spending climbs.
What Comes Next
A hold today doesn’t mean the hiking is over. Heather Long, chief economist at Navy Federal Credit Union, said, “Inflation is still the No. 1 problem in the U.S. economy.” She expects the Fed could hike again in December.
The market agrees. Nearly 75% of traders expect at least one more hike by year-end, per CNBC.
The September meeting minutes showed unanimous support for that hike but deep divisions over what comes next. Watch Warsh’s press conference for hints about how those divisions are playing out, because any shift in tone could reshape the next Fed interest rate decision.
So the Fed may sit still today. The question is whether it can keep sitting still after the polls close.
