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Fed Holds Rates Steady with Hawkish Tone; FOMC Meeting System to Be Overhauled from 2027

PolicyOctober 29, 20262 min read

The U.S. Federal Reserve kept interest rates steady at 3.75%-4.00% and said it will change how its meetings work starting in 2027. Two of the 12 policymakers wanted a rate increase instead.

The Fed holds rates steady

The Fed's policy group, the Federal Open Market Committee (FOMC), met on the 27th and 28th and left its main interest rate range unchanged at 3.75% to 4.00%. Inflation (the general rise in prices) is still high. But the Fed chose to wait, because it raised rates in September and financial conditions have already become tighter. Fed Chair Kevin Warsh said the economy is still strong and that the Fed wants more data before it makes any further move.

Key numbers

Rate range held at 3.75% to 4.00%
Two of 12 FOMC voters wanted a 0.25 percentage point increase: Governor Lisa Cook and Beth Hammack, president of the Cleveland Fed
Lisa Cook's dissent was the first time she voted against a decision since joining the Fed in 2022
U.S. economic growth for the first half of the year was revised up from 1.8% to 2.4%
The four-week average of new unemployment insurance claims was about 197,000, below 200,000

Why the Fed is cautious

The Fed raised rates by 0.25 percentage points in September to fight inflation. Higher rates make borrowing more expensive, so banks and households have become more careful with loans. Warsh said some businesses and households now face tougher loan terms, and investors are being more selective, especially about AI infrastructure. Still, he said overall financial conditions are not too tight.

Politics and the midterm elections

Some analysts think the Fed avoided a rate hike because the U.S. midterm elections are on November 3. President Donald Trump has said rates should be much lower. Warsh rejected this idea, saying politics played no part in the meeting.

Why it matters

The Fed's choice affects borrowing costs for families, businesses, and the stock market. Stocks closed higher on the day, with the Dow up 0.24%, the S&P 500 up 0.33%, and the Nasdaq up 0.32%. The December meeting is now the key question, and the new meeting plan could change how the Fed talks to the public about rates.

Glossary

FOMC: The Federal Open Market Committee, the group inside the U.S. Federal Reserve that sets interest rates.
Inflation: A general rise in prices over time, which lowers what money can buy.

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