3.75% to 4.00% Expected Rate Range as Fed Decision Looms
Key Facts
Economists expect the Federal Reserve to keep its interest rate in a range of 3.75% to 4.00% at its October meeting, Reuters reported, in a pause that may not last long as inflation remains hot. The Associated Press said most economists expect the committee to leave the range unchanged, but see another increase as a possibility this year. Policymakers meet on October 27 and 28, with the chair scheduled to hold a news conference on October 28. No decision had been announced, based on information published ahead of the meeting. Expectations for a hold follow the Fed’s September rate increase, its first in three years, while the path of its next move remains open.
The expected pause reflects a balance between still-elevated inflation and rising bond yields. Higher U.S. Treasury yields in the weeks following September’s increase limited the chances of a second consecutive rate hike in October, Reuters reported. Officials signaled a preference for waiting for more data before making another decision. The September minutes showed that most participants saw another increase as likely appropriate before the end of the year, but stressed that they were entering each meeting with an open mind. The minutes said participants tied future decisions to the data, making the expected hold a point to review indicators rather than a signal that the tightening cycle has ended. September’s increase was a quarter of a percentage point, bringing the range to its current level of 3.75% to 4.00%.
Moves in the bond market underscore the pressure policymakers face in assessing the effects of interest rates. Nominal Treasury yields rose about 35 basis points across maturities of two to 10 years between the September meetings, according to the Fed minutes. The minutes attributed part of the rise to an increase in the expected path of monetary policy and to strong economic data. Rising yields had made a consecutive increase in October less likely, Reuters reported, as officials favored waiting for a clearer picture. At the same time, participants at the September meeting generally concluded that inflation risks were tilted to the upside, and some said they had become more skewed to the upside in recent months. The expected October decision therefore weighs the cost of further tightening against persistent price risks.
Price data reinforce that caution. The U.S. consumer price index rose 0.6% in September on a seasonally adjusted monthly basis, after a 0.4% increase in August, while the annual increase was 3.7%, according to the Bureau of Labor Statistics. Gasoline was the biggest driver of the monthly increase, with its index rising 9.1% and accounting for more than half of the overall gain. Reuters estimated September inflation at 3.6% year over year, compared with 3.4% in August, and said pressures included fuel prices, airfares, rents and computers. The Associated Press also said the personal consumption expenditures price index was expected to rise 3.7% in September, well above the Fed’s 2% target. These readings keep price pressures at the center of the debate even as a rate hold is the prevailing expectation for the meeting.
On economic activity, Reuters said upcoming government reports would show that U.S. economic growth accelerated in the previous quarter, supported by resilient consumer spending and strong business investment tied to demand for artificial intelligence. This robust economic activity is set against rising prices as officials weigh how much tightening is needed to keep inflation under control. The September minutes linked part of the rise in bond yields to strong economic data, alongside expectations for the path of monetary policy. The upcoming data therefore matter to the debate over whether the expected pause will continue or be followed by another increase before year-end. Economists cited by the Associated Press left that possibility open as inflation remains hot.
The next milestone is October 29, when the Bureau of Economic Analysis’ schedule calls for the release of the advance estimate of third-quarter gross domestic product, along with the September personal income and outlays report. The latter includes the personal consumption expenditures price index, rather than a separate release of the core index. The expected PCE data drew attention in the Associated Press’s coverage, which reported expectations for a 3.7% increase in September against the Fed’s 2% target. The Bureau of Labor Statistics will then release the October consumer price index on November 10, 2026. These releases follow the committee meeting and news conference, adding new readings on inflation and growth to inform policymakers’ subsequent decisions.