Fed Holds Rates at 3.75% to 4% in Divided 10-2 Vote
Key Facts
The Federal Reserve on October 28 kept its target rate range at 3.75% to 4%, with the Federal Open Market Committee voting 10-2 in favor of the decision. The bank's statement said inflation remained elevated, while economic activity was expanding at a solid pace and domestic spending remained resilient. The hold came amid heightened uncertainty, which the statement attributed in part to geopolitical developments. The Fed aims for inflation of 2% over the longer run. The vote revealed divisions within the committee, with two members favoring a quarter-percentage-point rate increase.
The Fed's description of economic activity was more upbeat in its October statement, raising its assessment from "solid" at the September meeting to "strong." The statement kept its description of investment as solid while pointing to resilient domestic spending. But the positive assessment of the economy came as inflation remained elevated, according to the bank's wording. Consumer price data showed annual inflation at 3.7% in September, compared with 3.4% in August. Core inflation, which excludes food and energy, also rose 2.6% year over year after 2.4% in August. On a monthly basis, the overall index rose 0.6% in September after 0.4% in August, while the core index rose 0.3% in both months.
The economy added 29,000 nonfarm jobs in September, compared with an average monthly gain of 45,000 over the previous twelve months. The Bureau of Labor Statistics said the unemployment rate had remained within a narrow range of 4.1% to 4.3% since March. The data show a slowdown in the pace of hiring compared with the previous year's average, while unemployment remained within the range recorded by the bureau since spring. Among other activity indicators, durable goods orders rose 1.8% in September to $345.4 billion. Orders had increased 0.1% in August after revision, to $339.1 billion. The figures point to stronger industrial demand in September, alongside mixed signals from other sectors.
New home sales fell 0.6% in September to a seasonally adjusted annual rate of 676,000 units, from 680,000 in August. Sales were 5.3% below their September 2025 level, when they totaled 714,000 units. By contrast, the consumer confidence index rose to 91.7 points in October from 84.2 points in September. The Conference Board said the reading brought the index back to roughly its June 2026 levels. It also said the index had been on a downward trend since late 2021 or 2022. The available reading does not establish that the index exceeded previous expectations.
The decision was reflected in mixed moves across assets: the S&P 500 rose 0.3%, the Dow Jones added 0.2% and the Nasdaq gained 0.3% on Wednesday. The yield on two-year U.S. Treasury notes moved above 4.79% after the announcement of the two votes in favor of a rate increase, compared with 4.70% late Tuesday. The yield then fell to 4.69% after Fed Chair Kevin Warsh said the bank wanted to monitor how conditions evolved before taking its next step. The yield's movement shows that the committee vote initially prompted expectations of tighter policy, before easing after Warsh's remarks. This came as the official statement continued to describe inflation as elevated and economic activity as strong.
Preliminary third-quarter gross domestic product data and the September personal income and spending report were released on October 29, with the scheduled release time set for 8:30 a.m. Eastern time. The income and spending report includes the personal consumption expenditures price index, which the Fed monitors in assessing inflation. The data release follows the October decision, with the bank continuing to describe inflation as elevated. Minutes of the October meeting are due to be released on November 18, providing additional details about the committee's discussion. The next Federal Open Market Committee meeting is scheduled for December 8 and 9. The Bureau of Labor Statistics set November 10 at 8:30 a.m. Eastern time for the release of the October consumer price index.