Fed Holds Rates at 3.75‑4.00% as Inflation Stays Elevated

The U.S. Federal Reserve kept its benchmark interest rate unchanged at 3.75‑4.00% on Wednesday, despite two policymakers urging a 25‑basis‑point increase. The vote ended 10‑2, with Fed governor Lisa Cook and Cleveland Fed’s Beth Hammack voting for a hike. The Fed said inflation remains elevated, noting that consumer prices rose 3.7% in September from a year earlier, a bigger jump than the previous month. A spike in energy prices linked to the U.S. war with Iran has added to price pressures. Fed Chairman Kevin Warsh, speaking for the committee, reaffirmed the pledge to achieve price stability. ## Reaction Dan North, senior economist at Allianz Trade, called the upward inflation trend “the wrong way” and warned that a rate hike before the upcoming midterm elections would look suspicious. He also noted that AI companies appear indifferent to borrowing costs while the surge in AI data‑center building is pushing up construction‑material prices. ## Outlook Policymakers expect to raise rates at the December meeting to curb demand and bring prices down. Mortgage rates had hit a three‑year high of 7.4% earlier this month before easing slightly, keeping pressure on a housing market that has slumped for four years. Consumer spending stays strong among higher‑income shoppers, but average wages grew only 3% over the past year, leaving lower‑income families strained. Longer‑term rates are set by the bond market but can shift when the Fed changes policy, and the current pause leaves them largely unchanged. ## Context The Fed’s benchmark rate sets the cost of short‑term credit such as credit‑card loans, and its stance influences broader economic activity, especially housing and borrowing costs.