Fed Holds Rates at 3.75% to 4% as Two Officials Vote to Raise Them

The Federal Reserve voted Wednesday to leave its benchmark interest rate in a range of 3.75% to 4%, its final policy decision before the Nov. 3 midterm elections. The range has stood since the central bank raised rates by a quarter percentage point in September, according to CNBC.

The hold came with two dissents. Governor Lisa Cook and Cleveland Fed President Beth Hammack both wanted another quarter-point increase, CNBC reported. It was the first dissent of Cook’s tenure, which began in 2022. Cook is also at the center of a separate fight: President Donald Trump has tried to remove her over allegations about information on her home loan applications. CNBC reported that the Supreme Court stopped his earlier attempts, that the administration has restarted the effort, and that a hearing is scheduled for early November.

The vote came as inflation picked up. Consumer prices rose at an annual rate of 3.7% in September, up from 3.4% in August, NBC News reported. The Fed’s preferred gauge, the personal consumption expenditures price index, is due Thursday and is expected to show about 3.7%. NBC attributed much of the increase to the soaring cost of gasoline, diesel and crude oil, and said many economists see the effects spreading into the broader economy.

“Inflation remains elevated,” the Fed’s statement said. It added that “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 percent goal.” The statement described economic activity as expanding at a strong pace, a step up from the word “solid” used in September, CNBC noted.

At his news conference, Warsh said real activity “is clearly pointing in the right direction,” but added: “That’s good news, but inflation is too high.” He said energy and related prices “have moved higher again in recent weeks” and that the Fed’s job is to keep those relative price changes from broadening across the economy, according to NBC News.

Markets had priced in less than a 10% chance of a hike, according to the CME Group’s FedWatch tool, so the decision was widely expected. Futures pricing now points to a strong chance of another increase at the December meeting and perhaps one or two more in 2027, CNBC reported. Morgan Stanley economists told clients the outcome suggests the Fed “might not be done tightening.”

Warsh also announced a change to the calendar. The Fed will cut the number of meetings at which it votes on rates from eight to seven next year, with a further reduction in 2028, NBC reported. He said the change would improve the quality of its decisions.

The central bank is under pressure from both directions. Trump, who nominated Warsh, has argued for years that rates should be much lower, CNBC noted. Hawks on the committee argue that inflation, above the 2% target for more than five years, calls for faster action. Fed officials treat political independence as a cornerstone of the institution, though CNBC said some observers speculate they would not want to raise rates this close to an election. Vice Chair Philip Jefferson and New York Fed President John Williams have both said current conditions give policymakers time to judge their next move.