US Federal Reserve holds rates at 3.75%–4% despite high inflation
The decision comes six days before the midterm elections and was not unanimous
The US Federal Reserve (Fed) has kept interest rates at 3.75%–4%. The decision comes less than a week before the midterm elections and reflects the central bank’s caution amid conflicting signals about the economy.
The vote was split: two of the 12 members of the Federal Open Market Committee favoured raising rates by a quarter of a percentage point. The Fed said economic activity was growing strongly and domestic spending remained resilient, while inflation was still elevated and geopolitical uncertainty persisted.
Inflation and the labour market shape the decision
US inflation reached 3.7% year on year in September, well above the Fed’s 2% target. Higher energy costs and geopolitical tensions are putting pressure on prices, while the labour market is showing signs of cooling: 29,000 jobs were added in September. August’s gain was revised down to 133,000 from the initially reported 162,000.
Raising rates could help contain inflation, but would also make mortgages, consumer credit and business financing more expensive.
Keeping rates unchanged, meanwhile, offers households no immediate relief while prices continue to rise faster than the Fed’s target.
Decision comes ahead of the midterms
The decision comes at a politically sensitive time. On 3 November, voters will elect a new Congress, and the cost of living is one of their main concerns. Another rate rise could make housing and other everyday expenses even more costly.
Fed Chair Kevin Warsh was nominated by Donald Trump, who had repeatedly called for lower interest rates.
Wednesday’s pause does not settle the debate within the central bank over how to balance controlling inflation against risks to employment and economic activity.
