U.S. Federal Reserve Keeps Rate at 3.75–4% Despite Accelerating Inflation and Two Dissenters Seeking a Hike

The U.S. Federal Reserve on Wednesday, Oct. 28, 2026, left its key interest rate unchanged in a range of 3.75 to 4 percent at the conclusion of a two-day Federal Open Market Committee meeting, despite accelerating inflation over the past two months driven by higher energy prices.

The decision, widely expected by markets, came one month after a 25-basis-point hike in September — the first increase in three years — and is the Fed's last monetary policy decision before next week’s U.S. midterm elections.

"Inflation remains elevated"

In a statement after the meeting, the U.S. central bank said that "inflation remains elevated," adding that "the accumulation of more information will help the Committee determine the appropriate stance of monetary policy to ensure inflation returns to the Committee’s 2 percent objective in a timely manner," and stressing that the Committee "will restore price stability."

The statement described economic activity as "expanding at a strong pace," after having described it as "solid" in September, noting that uncertainty remains high "partly reflecting geopolitical developments," while domestic spending showed resilience.

Two members dissented seeking a rate increase

The decision was not unanimous: two of the 12 voting members dissented — Governor Lisa Cook and Cleveland Fed President Beth Hammack — both preferring a 25-basis-point rate increase. This was Cook’s first dissent since joining the Board in 2022; the Trump administration has sought her removal from the Board.

By contrast, Dallas Fed President Lorie Logan and Minneapolis Fed President Neel Kashkari joined the majority this time after voting against the hold in July, while the September hike had been unanimous among the twelve members.

Accelerating inflation and markets eye December

The hold came as the U.S. annual consumer price inflation rose to 3.7 percent in September from 3.4 percent in August, driven by higher gasoline, diesel and crude oil prices, while the producer price index jumped 6.3 percent year-on-year — its largest increase since 2022. On Thursday the personal consumption expenditures (PCE) price index, the Fed’s preferred inflation gauge, is due and is expected to rise to 3.7 percent.

Market attention shifted to the December meeting, with federal funds futures implying roughly an 85 percent probability of a rate hike then. Fed Chair Kevin Warsh has refrained from giving forward guidance on next steps at recent meetings and held a press conference after the decision to explain the Committee’s stance.

Markets received the decision calmly: the S&P 500 traded up about 0.1 percent and was roughly 1.1 percent below its record level, while the yield on the 10-year U.S. Treasury was about 5.02 percent.

A decisive week for central banks

The Fed’s decision opens a decisive week for major central banks: the European Central Bank will announce its decision on Thursday, followed by the Bank of Japan on Friday. The BOJ is expected to keep its rate at 1.25 percent, as the three central banks seek to contain an inflation wave driven by higher energy prices amid the U.S.–Iran conflict.

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