The US Federal Reserve is expected to keep interest rates unchanged at its last monetary policy meeting before the American midterm elections. The central bank will hold rates at 3.75-4 percent after a 10-2 vote, in line with market expectations. The decision was due to be announced on Wednesday.
CME FedWatch, a tool that tracks the likelihood of policy decisions, indicated more than a 90 percent chance that rates would stay where they are.
Fed statement points to strong growth and rising inflation
In its press release, the Fed said economic activity was expanding at a strong pace. It described domestic spending as resilient, productivity growth as strong and capital investment as robust. The central bank also noted that job gains had kept pace with the workforce and that the unemployment rate had changed little.
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The Fed acknowledged that uncertainty remains elevated, partly because of geopolitical developments. It also said inflation continues to rise. The bank said it would gather more information to determine the policy stance needed for a timely return of inflation to its 2 percent goal.
The latest Consumer Price Index report showed annual inflation rising to 3.7 percent in September, up from 3.4 percent in August. Energy prices accounted for much of the monthly increase.
Bowman signals a wait-and-see approach
Signs of a hold emerged earlier this month. Michelle Bowman, the Fed’s vice chair for supervision, advocated a “wait and see” approach. Speaking at the International Monetary Fund and World Bank meetings in Bangkok, Thailand, she said: “I don’t feel any urgency for taking further action at this point.”
The decision comes ahead of Thursday’s release of the Personal Consumption Expenditures (PCE) Price Index, which the central bank uses to assess inflation and guide its decisions.
The announcement follows an interest rate increase last month, made amid surging inflation. It was the first rate hike by the central bank since July 2023. US President Donald Trump criticised the move. He has repeatedly pressed the Fed to cut rates since taking office, and he wrote on Truth Social that “interest rates in the United States should be 1% or less.”
The Fed’s next monetary policy meeting is scheduled for December 8-9, when it will issue its final rate decision of the year. Current forecasts point to a quarter-point interest rate increase.
