Fed Holds Rates Steady as US Inflation Rises

The Federal Reserve on Wednesday kept its benchmark interest rate in a 3.75%-4% range after a 10-2 vote, matching expectations. It was the final monetary policy decision by the central bank before the US midterm elections. CME FedWatch had put the probability of unchanged rates above 90%. In its statement, the Fed described economic growth as strong. It said geopolitical developments partly explained continued high uncertainty. Domestic spending remained resilient, productivity growth was strong and capital investment was robust. Employment gains had matched workforce growth and unemployment had barely changed. The Fed acknowledged that inflation was still rising. It said additional information would help determine the policy needed to bring inflation back to the 2% target in a timely manner. The latest Consumer Price Index report showed annual inflation at 3.7% in September, up from 3.4% in August. Energy prices accounted for much of the monthly increase. The Personal Consumption Expenditures Price Index report is due Thursday, after the rate decision. The central bank uses the PCE Price Index to assess inflation and guide policy. Fed chair for supervision Michelle Bowman had advocated waiting for more information earlier this month, signaling that benchmark rates would stay unchanged. Speaking at the IMF-World Bank meetings in Bangkok, Thailand, this month, Bowman said further action was not urgent and policymakers needed time to see how conditions develop. The Fed raised rates last month amid surging inflation, its first increase since July 2023. US President Donald Trump criticized that move and has repeatedly urged the Fed to lower rates since taking office. Trump wrote on Truth Social at the time that US interest rates should not exceed 1%. The Fed will hold its next monetary policy meeting on December 8-9 and deliver the final rate decision of the year. Current forecasts point to a quarter-point increase.