Federal Reserve freezes lending costs at 4 percent ceiling before midterm vote

The Federal Reserve maintained its benchmark interest rate between 3.75 and 4 percent on Wednesday, marking the final policy adjustment before the United States midterm elections.

The central bank voted 10-2 to leave borrowing costs unchanged, a move that aligned with market projections. The CME FedWatch tool had placed the probability of a rate pause at over 90 percent prior to the announcement. This decision follows a rate hike last month, which was the first increase since July 2023.

Inflation data drove the policy hold. The latest Consumer Price Index report indicated that annual inflation rose to 3.7 percent in September, up from 3.4 percent in August. Energy prices accounted for the bulk of the monthly increase. The Fed stated that domestic spending remained resilient and productivity growth stayed strong, though it acknowledged that uncertainty persists due to geopolitical factors.

Michelle Bowman, the Fed chair for supervision, signaled the pause during meetings in Bangkok earlier this month. Speaking at the International Monetary Fund and World Bank gatherings, she argued for a "wait and see" approach. Bowman said she felt no urgency to take further action and that policymakers need time to understand how economic conditions will evolve.

President Donald Trump has frequently criticized the Fed for not lowering rates enough since taking office. He previously wrote on Truth Social that United States interest rates should be 1 percent or less. The central bank's next meeting is scheduled for December 8 and 9, where it will announce its final rate decision for the year. Current forecasts suggest a quarter-point increase at that time.

The Fed's statement noted that job gains have kept pace with the workforce and the unemployment rate has remained stable. The committee said it would gather more information to determine the appropriate policy stance for returning inflation to its 2 percent goal. The Personal Consumption Expenditures Price Index report is set to release on Thursday, providing additional data for the central bank's assessment.