Fed Holds Rates at 3.75% to 4% Amid Dissent and Rising Bets on a Hike
Key Facts
The Federal Reserve kept its target interest rate range at 3.75% to 4% on October 28, 2026, in a decision approved by a 10-2 vote. The board said in its statement that U.S. economic activity “has been expanding at a solid pace,” domestic spending remained resilient, and inflation remained elevated. The hold followed the Fed’s quarter-point rate increase at its previous meeting on September 16, bringing the range to its current level. Meanwhile, Atlanta Fed data published on October 27 showed a market-implied 90.24% probability of a rate hike by December 16. The latest decision and expectations for the next meeting place monetary policy in the context of both elevated inflation and strong economic activity.
The vote revealed divisions within the Federal Open Market Committee: Lisa Cook and Beth Hammack voted against holding rates, preferring a quarter-point increase in the target range. The other 10 members voted to leave the range unchanged, according to the Fed statement. The two officials’ stance meant calls for tighter monetary policy emerged in the decision itself, alongside the committee’s confirmation that inflation remained elevated. The Fed said that “the accumulation of additional information” would help the committee determine the appropriate monetary policy stance to return inflation to its 2% objective over time. The guidance ties the next move to an assessment of available data, while retaining the long-term inflation goal of 2%.
The Atlanta Fed’s GDPNow model estimated third-quarter GDP growth at an annualized rate of 3.3% in its October 28 update. That followed real annualized growth of 2.2% in the second quarter, compared with an increase of 2.5% in the first quarter, according to estimates from the Bureau of Economic Analysis. The figures put the third-quarter estimate above the pace recorded in the previous two quarters, while the Fed described economic activity as expanding at a solid pace. On prices, the consumer price index rose 0.6% month over month in September, after a 0.4% increase in August. The consumer confidence index also rose to 91.7 points in October from 84.2 in September, an increase of 7.5 points, according to the Conference Board as reported by the Associated Press.
Markets moved in mixed directions after the decision. U.S. stocks pared their gains slightly, while spot gold was little changed, according to a Reuters report carried by Investing.com. In a separate Reuters update, the Dow Jones rose 0.15% and the S&P 500 gained 0.10%, while the Nasdaq fell 0.11%. The yield on 2-year U.S. Treasuries also rose 3.9 basis points to 4.776%, and the 10-year yield increased 5 basis points to 5.047%, according to the same report. Bond and equity moves came as investors watched the rate outlook after the hold, while Atlanta Fed data showed strong bets on a hike by December 16.
Attention turns on October 29 to the Bureau of Economic Analysis’ advance estimate of third-quarter GDP, alongside its September personal income and spending report. The Bureau of Labor Statistics is scheduled to release the October consumer price index on November 10 at 8:30 a.m. Eastern time. The Fed will then hold its next meeting on December 8 and 9, with the press conference scheduled for December 9. These dates precede December 16, the date by which Atlanta Fed data measure the probability of a rate hike. The releases and meetings will be the next milestones in assessing inflation and economic activity ahead of the monetary policy decision expected in December.