Fed Holds Rates at 3.75%-4% Days Before Midterms

The Federal Reserve kept its benchmark interest rate at a range of 3.75% to 4% on Wednesday, holding steady at its final policy meeting before next week’s midterm elections, Theguardian reported. The decision followed a quarter-point increase in September, the central bank’s first hike since 2023.

Two of the 12 board members dissented, preferring a quarter-point increase, according to Theguardian. Npr and Cryptobriefing identified the dissenters as Fed governor Lisa Cook and Beth Hammack of the Cleveland Federal Reserve Bank, giving the vote a 10-2 split. Chair Kevin Warsh told reporters that election timing had no bearing on the outcome, saying politics drew no mention in the deliberations.

Also read: Fed Minutes Show Most Officials Favor Another Rate Hike by Year End

Key facts

• The target range stays at 3.75% to 4% after September’s 25 basis point hike.
• September consumer prices rose 3.7% year over year, up from 3.4% in August, above the Fed’s 2% target.
• Cook and Hammack dissented in favor of a quarter-point increase.
• Bitcoin traded near $80,427 with a market cap of $1.6T, edging toward $81,000 after the announcement, Cryptobriefing reported.
• Before the decision, CME FedWatch put roughly 93% odds on a hold and 7.2% on a 25 basis point hike, per Cryptobriefing.

A pause with conditions attached

The Fed’s statement described economic activity as expanding at a strong pace and the labor market as relatively stable, while repeating that inflation remains elevated, Cryptobriefing reported. Npr quoted the committee’s line that “Inflation remains elevated” and noted the Fed renewed its pledge to deliver price stability.

The backdrop is an energy shock. Theguardian linked this year’s price pressure to the war with Iran and the closure of the strait of Hormuz, with oil briefly trading above $117 a barrel earlier this week. NYU Stern economist Nicholas Economides told Theguardian that rate increases cannot by themselves fix supply-driven inflation and would slow an economy that does not need slowing.

Also read: Warsh Won't Signal October Fed Move as Markets Price a Hold

The pause drew a muted market response. Cryptobriefing reported the S&P 500 edged lower after the decision, while bitcoin moved modestly higher.

Households feel the pinch

Borrowing costs matter directly to consumers: the benchmark rate helps set charges on credit cards and other short-term loans. Npr reported mortgage rates reached a three-year high of 7.4% earlier this month before easing slightly, and that the housing market has been in a slump for four years.

Npr also reported that average wages rose just 3% in the 12 months through September, lagging price growth. Moody’s Analytics chief economist Mark Zandi told Npr that lower- and middle-income Americans are seeing purchasing power decline, which he said largely explains weak sentiment about the economy. Investment in artificial intelligence has kept expanding regardless of rates, Allianz Trade senior economist Dan North told Npr.

Warsh also outlined a lighter meeting schedule: from fall 2027, seven of the Fed’s eight annual meetings will set rates, falling to six in 2028, Theguardian reported.

Why it matters

The hold keeps the benchmark near one of its highest pre-election levels in more than two decades, preserving pressure on variable-rate borrowers while leaving room for the Fed to move after voters go to the polls. It also tests the central bank’s independence at a moment when President Donald Trump has publicly called for rates of 1% or less; Theguardian reported Warsh declined to comment on Trump’s remarks about the board’s political leanings.

What to watch

Attention turns to the December meeting, where investors widely expect a quarter-point increase, Npr and Cryptobriefing reported. Cryptobriefing said pre-meeting FedWatch data put the odds of that hike at 77.7%. The Fed has said incoming data will shape its stance.

This article is for information only and is not financial advice. Cryptocurrency and rate-sensitive markets are volatile and uncertain.

Written by

Benjamin

Benjamin Carter covers business, finance, and the stock market for StockPil, focusing on the trends and data that matter to everyday investors.

Sources: The Guardian, Npr, Cryptobriefing