The Federal Reserve kept its key interest rates unchanged, even as price pressures across the US economy continued to build.
The Federal Open Market Committee, the central bank’s rate-setting body, voted to maintain the federal funds target range at 3.75 percent to 4.00 percent.
The decision came a month after the Fed delivered its first rate increase since July 2023. At its September meeting, the FOMC unanimously approved a quarter-point hike, taking rates to their current range.
The pause had been widely anticipated on Wall Street. Traders overwhelmingly believed the policy committee would not raise rates again during this two-day meeting.
Inflation remains a major challenge for policymakers. In the year to September, consumer prices increased by 3.7 percent, a slight acceleration from August, while a measure of wholesale prices climbed by more than 6 percent over the same period.
However, one important source of inflationary pressure has begun to ease. AAA data showed the average price of regular gasoline at about $4.28 a gallon, roughly 4.7 percent below its recent September peak.
‘Raising rates again today would have been politically toxic ahead of the midterms,’ former Goldman Sachs analyst Nic Puckrin told Our News Outlet.
‘But make no mistake – if policymakers were deciding based on the data alone, they would have raised again today,’ he said.
The Federal Reserve’s key rate-setting body, the Federal Open Market Committee, voted to hold the federal funds target range at 3.75 percent to 4.00 percent.
President Donald Trump criticized the Fed after last month’s rate increase, although he directed most of his criticism at the FOMC rather than Fed chair Kevin Warsh, whom he appointed.
Although the Fed left short-term borrowing costs unchanged, consumer interest rates have continued to rise since last month’s substantial increase.
Freddie Mac reported that the average rate on a 30-year fixed-rate mortgage stood at 7.32 percent, up from approximately 7.10 percent last month.
The average 30-year mortgage rate reached a three-year high of 7.4 percent earlier in October.
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Aditya Bhave, Bank of America’s head of US economics, said economists and the Fed had become too comfortable with inflation remaining above its target.
‘Unless the Fed takes this problem more seriously and stops essentially making excuses about inflation, I think we’re not going to get back to 2 percent until the next recession,’ Bhave said.
The economy is expanding at a healthy pace, while unemployment remains relatively low at 4.2 percent, despite sluggish hiring.
The government is due to publish its estimate of economic growth for the July-to-September quarter tomorrow. Growth is expected to come in at 3 percent, up from 2.2 percent in the April-to-June period.
President Donald Trump criticized the Fed after last month’s rate increase, although he directed most of his criticism at the FOMC rather than Fed chair Kevin Warsh, whom he appointed.
The government is due to publish its estimate of July-to-September economic growth tomorrow, with expansion expected to reach 3 percent.
For Bret Kenwell, a US investment analyst at eToro, December will be the crucial test.
‘Will Chair Warsh validate expectations for a hike or reopen uncertainty? With the Fed’s new communication style, the bigger risk is that December arrives with the decision looking more like a toss-up, leaving markets more vulnerable to volatility,’ Kenwell told Our News Outlet.
Two Fed officials dissented from Wednesday’s decision. Governor Lisa Cook and Beth Hammack, president of the Federal Reserve Bank of Cleveland, both voted for a quarter-point rate increase.
The FOMC had voted unanimously to raise rates at its previous meeting.
Cook has faced pressure from the Trump administration, which attempted to remove her last year. However, the Supreme Court ruled in June that she could remain in office while the legal proceedings continued.
No president has previously dismissed a Federal Reserve governor, underscoring the central bank’s longstanding independence from day-to-day political influence.
Trump renewed his effort to remove Cook last month by creating a committee to investigate allegations that she committed mortgage fraud. Cook has denied the allegations.
