Fed Holds Rates at 3.75% to 4% in Split 10-2 Vote
Key Facts
The Federal Reserve kept its target interest rate range at 3.75% to 4% on October 28, after approving the statement in a 10-2 vote. Lisa Cook and Beth Hammack favored raising the range by a quarter percentage point, two dissents that showed some members of the committee wanted to tighten policy immediately. The adopted decision left rates unchanged, following a quarter-point increase on September 16 that brought the range to its current level. The committee said inflation remained elevated and that it would gather more information to determine the appropriate policy. According to the statement, the policy is aimed at returning inflation to the committee’s 2% target in due course.
The rate hold came as the October statement described economic activity as expanding at a strong pace, after the September statement used the word “solid.” The committee said domestic spending had remained resilient despite continued elevated uncertainty, partly due to geopolitical developments. It said job gains were in line with labor force growth and capital investment was solid. The statement also described productivity as strong, combining an assessment of resilient economic activity with inflation that has yet to reach the target. By tying its decision to further information, the committee indicated that upcoming data readings remain part of determining the monetary policy path, without announcing the direction of its next move in advance.
Second-quarter gross domestic product data provide background to that assessment: real GDP grew at an annual rate of 2.2%, compared with 2.5% in the first quarter. The Bureau of Economic Analysis raised its second-quarter estimate by 0.7 percentage point from its second estimate. The bureau attributed second-quarter growth to consumer spending, investment and exports, while imports increased. These components show varied sources of growth between domestic demand and foreign trade, as the Fed kept its focus on inflation and additional data. The reading covers April, May and June, the period before the October meeting.
Housing borrowing costs reached an elevated level earlier in the month: the average rate on a 30-year fixed-rate mortgage was 7.4%, its highest level in three years, according to the Associated Press. The reading offers an indicator of the financing costs facing households, as inflation remains above the Fed’s target. In available price data for August, the personal consumption expenditures price index rose 3.4% from a year earlier, the same rate recorded in July. The core index, excluding food and energy, was 3.0% year over year in August. Those figures matter in light of the committee’s statement that inflation remains elevated and that it is seeking to return it to 2%.
After the decision, the S&P 500 rose 0.1%, while the Nasdaq Composite fell 0.1%. The yield on two-year U.S. Treasuries rose 3.9 basis points to 4.776%, and the 10-year yield increased 5 basis points to 5.047%. Reuters said markets were awaiting more data on the inflation trajectory and that traders trimmed some rate-hike bets after the decision. The agency also reported that yields continued to rise. The different moves in the two stock indexes reflected a mixed response in the post-decision session, while bond yields rose across the cited maturities.
The advance estimate of third-quarter GDP and September personal income and spending data were scheduled for release on October 29 at 8:30 a.m. Eastern Time. The releases come the day after the decision, as the committee seeks to gather more information before determining the appropriate policy. The GDP estimate is expected to provide a more recent reading on economic activity than the second-quarter figures. Personal income and spending data also offer fresh indicators at a time when inflation remains an explicit focus of the Fed’s assessment. The board scheduled its next Federal Open Market Committee meeting for December 8 and 9, 2026.