Fed holds rates at 3.75% to 4% in split 10-2 vote
Key Facts
On October 28, 2026, the Federal Open Market Committee kept the federal funds target range at 3.75% to 4%, with the decision passing by a 10-2 vote, according to the Federal Reserve statement. The decision leaves the rate unchanged, while inflation remained elevated relative to the Committee’s 2% goal, the statement said. Lisa Cook and Beth Hammack voted against keeping the range unchanged, preferring a quarter-percentage-point increase at the meeting. The statement said, "The accumulation of more information will help the Committee determine the appropriate stance of policy to ensure inflation returns to its 2% goal in a timely manner." The decision followed the Fed’s quarter-point increase in September, approved unanimously by a 12-0 vote.
The split vote between the two meetings showed differing preferences among Committee members over the immediate next step: in September, the rate increase was approved unanimously, while two members preferred another increase in October. The September minutes said participants had not seen sufficient progress in lowering inflation in recent months. The minutes also noted that geopolitical developments and accelerating investment in artificial intelligence had contributed to price pressures. By contrast, the October statement upgraded its assessment of economic activity, describing the pace of expansion as "strong," after the September statement called it "solid." The October statement said domestic spending remained resilient, productivity growth was strong and capital investment was solid, while uncertainty remained elevated in part because of geopolitical developments.
Bureau of Labor Statistics data show the Consumer Price Index rose 3.7% year over year in September, compared with a 3.4% increase in August. The core index, excluding food and energy, rose 2.6% year over year in September, after 2.5% in August. Month over month, the headline index rose 0.6% in September after a 0.4% increase in August, while the core index rose 0.3%. Energy was among the main drivers of the monthly reading: its index rose 5.2% in September after a 2.1% increase in August. The gasoline index also rose 9.1% during the month, accounting for more than half of the monthly increase in the headline index.
September’s data reflect inflation remaining above the Fed’s target in both the headline and core measures, alongside the central bank’s assessment that activity is expanding at a strong pace. The September meeting minutes had noted insufficient progress in lowering inflation in previous months and pressures linked to geopolitical developments and artificial intelligence-related investment. September participants’ projections showed a median for real GDP growth of 2.3% for 2026 and 2.4% for 2027. Their median unemployment rate projection was 4.1% in both years. These estimates provide the economic backdrop for the October decision, while the Committee’s statement linked its next policy stance to the accumulation of more information.
Traders priced an 85% chance of a rate hike in December, according to the CME FedWatch tool, Axios reported on October 28. Major U.S. indexes closed with modest gains on decision day: the S&P 500 and Nasdaq each rose 0.3%, while the Dow Jones gained 0.2%, according to the Associated Press. The moves came after the target range was held, while a December increase remained in traders’ pricing. Federal Reserve Chair Kevin Warsh did not commit to a next move, according to Axios. He also announced that one of the 2027 meetings would be devoted to monetary strategy, with no rate vote or policy statement.
The Bureau of Economic Analysis had scheduled the advance estimate of third-quarter GDP and September personal income and spending data for October 29, 2026, at 8:30 a.m. The minutes of the October meeting, held on October 27 and 28, were scheduled for release on November 18. The Committee’s next meeting was scheduled for December 8 and 9, 2026. These dates follow the October decision to leave rates unchanged, with two members dissenting in favor of a quarter-point increase. Activity and price data released before the December meeting will be among the information the Committee said would help determine the appropriate policy stance.