Federal Reserve Holds Rates Steady in 10-2 Vote as Inflation Stays Elevated

The Federal Reserve held interest rates steady on Wednesday, keeping its benchmark rate in the 3.75% to 4% range in a 10-2 vote, even as inflation stayed above its 2% target.

“Inflation remains elevated,” the rate-setting Federal Open Market Committee said in a statement after its two-day meeting. “The accumulation of more information will help the Committee determine the policy stance appropriate to ensure a timely return of inflation to the Committee’s 2% goal,” the statement said. “The Committee will deliver price stability.” The Fed also raised its view of the economy to “strong” from “solid” in its September statement, and said job gains had kept pace with the growth of the workforce.

The two dissents

Fed Governor Lisa Cook and Cleveland Fed President Beth Hammack dissented, each favoring a quarter-point increase instead of a hold. Cook has been targeted by President Donald Trump for removal from the central bank. The Supreme Court ruled in June that she could keep her job while litigation played out, and Trump renewed his attempt to remove her last month by setting up a committee to look into allegations that Cook committed mortgage fraud, which she has denied, according to Marketplace.

The inflation data since the last meeting gave the dissenters ammunition. The Consumer Price Index rose 3.7% over the 12 months through September, while the Producer Price Index rose 6.3% over the same period, according to the New York Post. The Fed raised its benchmark rate in September for the first time since 2023, and Trump has argued the central bank should lower rates instead.

Markets look to December

Stocks were mixed after the decision, with the Nasdaq composite down 0.1% and the S&P 500 up 0.1%, according to Reuters. Treasury yields moved slightly higher, with the 2-year yield up 3.9 basis points to 4.776%, the 10-year yield up 5 basis points to 5.047% and the 30-year yield up 3.8 basis points to 5.338%. The U.S. dollar index was up 0.02%.

Investors are now focused on December. The central bank is largely expected to issue a quarter-point hike at that meeting, according to the New York Post. Kay Haigh, global head of fixed income at Goldman Sachs Asset Management, said, “We expect the Fed to resume rate hikes in December. September’s strong CPI print is a reminder that upside inflation risks remain, and the Fed is likely to look to take out further insurance.”

A further increase would feed through to borrowing costs on mortgages, auto loans and credit cards, according to the New York Post. For now, the pause leaves those costs where they were, while the December meeting will test whether the Fed follows its September increase with a second move.

Reporting based on coverage by Reuters, Marketplace and the New York Post.