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Economy

Fed Expected to Hold Rates at 3.75% to 4.00% This Week as Markets Price a 90% Chance of a Pause

Federal Reserve policymakers have signaled they will hold short-term borrowing costs steady at the October 27-28 meeting, with rate futures pricing a 90% chance of a pause, even as inflation data due later in the week could point to more hikes ahead.

By admin Oct. 26, 2026 · 8:42 AM ET 3 min read

A large stone building with tall columns stands beside a wet street in Washington.
A large stone building with tall columns stands beside a wet street in Washington.

Federal Reserve policymakers have signaled they will not raise short-term borrowing costs again this week, Reuters reported on Monday, even as inflation concerns remain in front of them and investors expect a pause that may not last long.

Rate futures were pricing a 90% chance of a hold at the Fed’s October 27-28 meeting as of Friday, according to Reuters. The anticipated decision would keep rates steady in the 3.75% to 4.00% range.

Why a pause, and why it may be brief

Workers sit at desks with computer monitors on a trading floor under large blank wall screens.
Workers sit at desks with computer monitors on a trading floor under large blank wall screens.

Data due just one day after the Fed’s decision are expected to show why the pause could be short-lived. Inflation picked up last month and spread beyond rising fuel prices, Reuters reported, while economic growth accelerated last quarter on solid consumer spending and business investment driven by demand for AI.

At the same time, the labor market has been stable, with the unemployment rate at 4.2% last month. Hourly wage growth has tracked below inflation for the last six months, which Reuters said gives the Fed a point it can cite for waiting.

Analysts said a sharp rise in Treasury yields after the Fed’s September rate hike changed the calculation. The rise in the 10-year Treasury yield to near quarter-century highs threatened to slow the economy more than policymakers intended, according to Nationwide Chief Economist Kathy Bostjancic, and prompted officials including New York Fed President John Williams and Fed Vice Chair Philip Jefferson to signal they were content to wait for more data.

Three shoppers seen from behind walk down a grocery store aisle lined with shelves of packaged goods.
Three shoppers seen from behind walk down a grocery store aisle lined with shelves of packaged goods.

“The data, in my opinion, do support a rate hike,” Bostjancic said, noting that since the last meeting the economy, the consumer and the labor market had stayed strong and inflation had moved the wrong way.

Politics, dissent and the next inflation reading

A November 3 election that will decide whether President Donald Trump’s Republican Party keeps control of both houses of Congress adds a delicate element, Reuters reported. Gregory Daco, chief economist at EY-Parthenon, said Fed Chair Kevin Warsh will have to dispel any impression that the decision was political in any way, while keeping alive the expectation of another rate hike ahead.

“If Chairman Warsh does not provide any clue or essentially says that the Fed is waiting for more evidence (of easing inflation) that would be a signal that the Fed is not credible, and that would likely lead to spiking yields that would actually be more dramatic for the economy” than an actual rate hike, Daco said.

BMO Chief U.S. Economist Scott Anderson said the October meeting will be a closer call than markets are pricing, and he expects at least one dissent from Cleveland Fed President Beth Hammack, possibly joined by others. Anderson now expects two more rate hikes, Reuters reported.

A residential street lined with houses and autumn trees, with a blank white sign on a wooden post in the foreground.
A residential street lined with houses and autumn trees, with a blank white sign on a wooden post in the foreground.

The next inflation reading, due Thursday, is also in view. Economists project the September personal consumption expenditures price index accelerated to 3.6% from 3.4% in August, Reuters reported, against the Fed’s target of 2% for the 12-month change in that index. Investors will watch the Fed’s post-meeting statement and Warsh’s news conference for how he describes financial conditions and inflation that has run above target for more than five years.

Reporting based on coverage by Reuters and Investopedia.

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