Fed holds interest rates steady even as inflation remains high

Key points

• The Federal Reserve kept its benchmark rate at 3.75% to 4% on Wednesday after September's hike.
• Fed Chairman Kevin Warsh said inflation remains too high and the Fed has not yet controlled it.
• Two FOMC members dissented and voted to raise rates by 0.25 percentage points.

The Federal Reserve held interest rates steady on Wednesday, leaving the federal funds rate at a target range of 3.75% to 4% after raising borrowing costs in September. The central bank said economic activity is growing at a "strong pace" while inflation remains elevated.

Wall Street had expected the Fed to stand pat, and the three major indexes were essentially flat after the announcement. The decision comes less than a week before the midterm elections, where affordability issues are a top concern for voters.

Warsh on inflation and economy

At a press conference, Fed Chairman Kevin Warsh said consumer spending is robust, unemployment is low and overall growth is healthy. He said credit conditions have tightened since September, pointing to a "more durable period" of growth and price stability.

Warsh also said inflation remains "too high" and that the Fed has not yet succeeded in bringing it under control. He noted inflation has run above the committee's 2% goal for close to six years.

It's our responsibility to get inflation down.

— Fed Chairman Kevin Warsh

Dissents and rate outlook

Ten FOMC members voted to hold rates steady. Fed Board Governor Lisa Cook and Cleveland Fed President Beth Hammack dissented, favoring a 0.25 percentage point increase.

Warsh declined to say whether the Fed would raise rates at its Dec. 8-9 meeting. Some economists expect a hike in December and more tightening in 2027.

What it means for borrowers

The federal funds rate affects borrowing costs across the U.S. The pause may give borrowers some relief, but analysts said loan rates could still climb before the holidays.