Fed opens two-day meeting with markets expecting a hold after September’s rate increase

By Kenji Harrow

WASHINGTON — The Federal Reserve’s policy committee opens a two-day meeting on Tuesday with investors and economists widely expecting it to hold its benchmark interest rate steady at 3.75% to 4% after September’s increase, even as a hotter-than-expected inflation report keeps a further hike in play for December.

The Federal Open Market Committee meets Oct. 27 and 28, according to the Fed’s meeting calendar, and is scheduled to release its policy statement at 2 p.m. Eastern on Wednesday. It is the second-to-last meeting of 2026; the final one is set for Dec. 8 and 9. This meeting does not include an updated Summary of Economic Projections, the quarterly set of forecasts that includes officials’ “dot plot,” Kiplinger reported.

Futures traders were pricing in a probability of nearly 90% that the committee will leave rates unchanged, according to CME Group’s FedWatch tool as cited by Kiplinger on Monday. The same tool showed a 73% chance of a quarter-point hike in December, up from 42% a month earlier.

The inflation backdrop

The case for further tightening rests largely on prices. The Bureau of Labor Statistics’ September consumer price index, released Oct. 14, showed prices up 0.6% from August and 3.7% from a year earlier. Gasoline rose 9.1% in the month, accounting for more than half of the monthly increase, according to the agency. Core prices, which exclude food and energy, rose 0.3% for the month and 2.6% for the year.

Bank of America economist Aditya Bhave has argued there is a case for moving now. “The inflation picture has gotten worse on net since the September meeting,” he said, according to Kiplinger. “The beat in September inflation was large and broad-based enough to offset last month’s bigger-than-expected downward revisions.”

Deutsche Bank economists see reasons to wait. “Financial conditions have started to tighten, though they remain accommodative on many metrics,” they wrote, adding that “the Fed might prefer to stay out of the headlines for raising rates just ahead of a midterm election where affordability is the principal concern,” according to the same Kiplinger roundup.

Paul Eitelman, global chief investment strategist at Russell Investments, said he expects “a hawkish hold in October with the Fed delivering one more hike at year-end,” according to Kiplinger.

Warsh’s approach

The meeting is among the first tests of how Chair Kevin Warsh communicates with markets. Warsh has rejected traditional forward guidance, CNBC reported, and at the September news conference he said of the committee’s projections, “Those aren’t my forecasts.” Speaking at an International Monetary Fund event in Bangkok on Oct. 16, Warsh said he was not signaling a decision either way and said, “The world has broadly conformed to our expectations,” according to CNBC.

In an August speech in Jackson Hole, Wyo., Warsh said the Fed’s 2% inflation goal “is a firm, fixed target,” CNBC reported. Vice Chair Philip Jefferson and New York Fed President John Williams both indicated in recent weeks that they saw little urgency to raise rates again, according to the same report.

Fed officials have been in their pre-meeting blackout period since Oct. 17, which runs through Thursday, Oct. 29, limiting public comment on policy, Kiplinger noted.

The 12 voting members this year include Warsh, Jefferson, Governors Michael Barr, Michelle Bowman, Lisa Cook, Jerome Powell and Christopher Waller, Williams, and regional bank presidents Beth Hammack of Cleveland, Neel Kashkari of Minneapolis, Lorie Logan of Dallas and Anna Paulson of Philadelphia.

Warsh’s news conference after the decision will be watched for signals about December. “Investors will be particularly focused on Chair Warsh’s post-meeting press conference for clues about the future path of monetary policy,” Brandon Zureick, chief economist at Johnson Investment Counsel, said, according to Kiplinger.

The Washington Inquisitor is seeking comment from the Federal Reserve; this story will be updated with any response.