Fed Holds Rates at 3.75-4% as Two Officials Push for a Hike

The US Federal Reserve held its benchmark interest rate steady at a target range of 3.75% to 4% on Wednesday (28 October), but two policymakers dissented in favour of a further rise, underlining concern that inflation is proving stubborn. Chair Kevin Warsh also announced changes to the Federal Open Market Committee’s (FOMC) meeting schedule from next year.

The decision was widely expected. Markets had priced in less than a 10% chance of a hike, according to the CME Group’s FedWatch tool cited by CNBC. The range has been unchanged since the Fed raised rates by a quarter of a percentage point in September.

Why Did the Fed Hold Rates?

In its statement, the FOMC said that while “uncertainty remains elevated owing, in part, to geopolitical developments, domestic spending has been resilient”, and repeated that “inflation remains elevated”. CNBC noted that the committee described economic activity as “expanding at a strong pace”, an upgrade from “solid” in September, and removed the sentence that had explained September’s increase.

Holding rates gives policymakers more time to judge how the economy is responding to the September hike and to the recent rise in longer-term borrowing costs. Inflation has been above the Fed’s 2% target for more than five years, and CNBC reported that the Fed’s preferred inflation gauge is expected to show prices rising by more than 3% in September, even excluding food and energy. Economists are concerned that price pressures have spread beyond energy and the effects of the Iran war.

Who Dissented, and Why?

Two of the 12 voting members opposed the decision. Governor Lisa Cook and Cleveland Fed President Beth Hammack both preferred to raise the target range by a quarter of a percentage point, the Fed said. CNBC reported that it was Cook’s first dissent since she joined the Board in 2022.

The split reflects a debate inside the committee about how aggressively to respond to rising prices. Futures markets now point to a strong possibility of another hike at the December meeting, and perhaps one or two more in 2027, although Warsh has avoided giving explicit forward guidance.

What Changes Did Warsh Announce?

At his press conference, Warsh said the committee still believed eight meetings a year was “the right number”, but that in 2027 “one meeting will focus exclusively on broad monetary policy strategy, with neither a vote on the federal funds rate nor a policy statement anticipated”. He said he expected two strategy-only meetings and six policy-setting meetings in 2028.

In practice, that means fewer opportunities to change interest rates each year, a shift that could make each remaining decision more significant for markets.

How Strong Is the US Economy?

Growth remains firm. CNBC said the Atlanta Fed’s GDPNow tracker points to third-quarter growth of more than 3%. “The Fed is taking a wait-and-see approach, and I think that makes sense given where we are in the cycle,” Andrew Davis, head of investment strategy at Bryn Mawr Trust, told CNBC.

What Does It Mean for Borrowers, Savers and Investors?

• Borrowers: rates on credit cards and variable-rate loans, which track the federal funds rate, are likely to stay high, and another hike in December would push them up again.
• Savers: high-yield savings accounts and money market funds should continue to offer relatively strong returns. Our guide to building an emergency fund explains where to keep cash.
• Investors: higher-for-longer rates tend to weigh on growth stocks and crypto. Our explainers on bull and bear markets and index funds versus ETFs cover long-term approaches.

Bitcoin fell below $80,000 ahead of the decision, as we reported in our pre-meeting coverage. The Fed’s next scheduled decision is in December.

Featured image: The Marriner S. Eccles Federal Reserve Board Building in Washington DC, by the Federal Reserve / Wikimedia Commons, public domain. File photo.

Sources

• Federal Reserve — Federal Reserve issues FOMC statement (28 October 2026).
• CNBC — Fed holds rates steady as two officials dissent in favour of a hike (28 October 2026).