The US Federal Reserve on Wednesday (October 28, 2026) held interest rates steady, in line with market expectations, days ahead of crucial midterm elections where surging inflation has been a key issue.
The 12-member Federal Open Market Committee voted 10-2 to hold rates at a target range between 3.75 and 4.00%, citing the need for more data in the fight against inflation, after having hiked for the first time in three years at its previous meeting in September.
“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 two percent goal,” the Fed said in a statement announcing its decision.
Two members of the committee, Governor Lisa Cook and Cleveland Fed President Beth Hammack, dissented, calling instead for an immediate 0.25-percentage-point rate hike.
The central bank has missed its long-term two-percent target for inflation for more than five years, with households and businesses battered by sustained price increases.
U.S. President Donald Trump’s war on Iran, launched in late February, has sent energy prices skyrocketing and fueled domestic inflation, alongside his wide-ranging tariff policies.
Prices have also been driven by an investment boom in artificial intelligence (AI) technology and the build-out of huge data centres to support it.
The decision comes six days ahead of the November 3 midterm elections, in which the Democratic Party is seeking to wrest control of both houses of Congress from Mr. Trump’s Republicans.
Mr. Trump’s handling of the economy has been a key issue throughout the campaign, with working-class households across the country struggling to make ends meet despite largely stable overall economic growth.
U.S. consumer inflation came in hotter than expected in September, clocking in at 3.7%, edging back towards a three-year high established in May.
Still, key policymakers at the Fed — including Mr. Warsh — have signalled that they did not see an urgency to raise rates again immediately.
Speaking in Bangkok earlier this month, Mr. Warsh said that U.S. economic conditions had “broadly conformed” to policymakers’ expectations, fueling speculation that the Fed may pause at the October meeting.
On Wednesday (October 28, 2026), the Fed said economic activity in the United States was expanding at a “strong” pace, upgrading its language from the FOMC meeting six weeks prior.
‘Don’t understand the logic’
Wendy Edelberg, senior fellow at the Brookings Institution, told AFP before the meeting that a decision to hold after raising rates in September was potentially contradictory, given the labour market — the Fed’s other mandate — has been largely stable.
“In terms of the economics of it, I don’t totally understand the logic,” she said.
“If there was a reason to raise interest rates at the last meeting, I think that there’s just as compelling of an economic reason to raise interest rates at this meeting.”
The Fed has a dual mandate to maintain maximum employment while keeping inflation to its long-term target.
It achieves this goal largely using one tool: the economy’s key interest rate. Raising rates tends to cool inflation but can also dampen economic activity; lowering them can spur economic activity but also fuel inflation.
The U.S. unemployment rate has been largely stable around 4.2% over the last year, with job growth mostly in positive territory — albeit driven by a few sectors.
Other advanced economies have also been grappling with high inflation, and on Wednesday (October 28, 2026) Canada’s central bank raised its key rate to 2.5%, its first hike since July 2023.
Attacks on Fed
Loretta Mester, former head of the Cleveland Fed, took part in FOMC meetings during her tenure and insisted that the committee did not “take into account any kind of political issues” when it debated monetary policy.
Still, Mr. Trump has loomed large over the Fed since he returned to power last year.
In his second term, he has led an unprecedented assault on the Fed’s independence, pursuing criminal charges against Mr. Warsh’s predecessor, Jay Powell and attempting to fire Governor Cook as he demanded lower interest rates.
While the probe against Mr. Powell was dropped to smooth the way for Mr. Warsh’s Senate confirmation, the White House has recently renewed its drive to fire Ms. Cook — despite a Supreme Court decision that batted back an earlier attempt.
“I don’t think it’s going to stop because I think it’s in the nature of this administration to continue those attacks,” said Ms. Mester.
Published – October 28, 2026 10:59 am IST
