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The Federal Reserve chose to wait. On October 28, the US central bank held its benchmark interest rate steady at a range of 3.75% to 4%, pausing just six days before the November 3 midterm elections while inflation remains well above its target. According to reports from Nikkei Asia and Channel News Asia, the decision was approved in a 10-2 vote of the rate-setting Federal Open Market Committee — but the two dissents, and the statement's hints about what comes next, matter as much as the hold itself.
Why the Fed paused
The Fed's statement said inflation "remains elevated" while acknowledging that economic activity is expanding at a strong pace, supported by resilient spending, strong productivity growth and robust investment. Its message was patience: "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 2% goal." The pause gives officials time to judge the effects of September's quarter-point hike — the first rate increase in three years — and to see how the midterm results affect the outlook for the war in Iran, which Chair Kevin Warsh cited as a driver of energy prices. Warsh, who took over as Fed chair in May, insisted politics played no part in the decision, saying, "We're working on it," when asked about price stability.
Who wanted to hike instead
Governor Lisa Cook and Cleveland Fed President Beth Hammack dissented, preferring an immediate quarter-point hike. Their argument is visible in the data: consumer price inflation rose to 3.7% in the year to September, according to the Bureau of Labor Statistics, more than a percentage point above the Fed's 2% target, and the central bank has now missed that target for more than five years. Warsh acknowledged the pressure, telling reporters that "energy and related prices have moved higher again in recent weeks, and our job is to ensure that relative price changes in some sectors do not broaden out across the economy."
What is driving inflation
Three forces are colliding. President Donald Trump's war on Iran, launched in late February, has sent energy prices sharply higher, alongside his wide-ranging tariff policies. At the same time, an investment boom in artificial intelligence and the build-out of huge data centres is adding demand. The result is inflation that is being fed from both the energy shock and the tech boom — which is why the Fed's usual playbook feels less certain than usual, and why officials want more data before moving again.
What happens next
The committee meets again in early December, and traders are now even more confident of a quarter-point increase there — CME FedWatch puts the odds at nearly 80%. Warsh declined to prejudge that meeting, noting that "a lot of things can happen" in six weeks, and he announced that one scheduled meeting in 2027 will instead be devoted entirely to broad monetary policy strategy. For borrowers, the practical message is unchanged for now: rates stay where they are, mortgages and loans stay expensive, and the next real decision comes in December — after voters have had their say.
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