Hold the rate. The Fed can’t pump oil.

The US Federal Reserve held its target interest rate at 3.75 to 4 per cent on 28 October 2026. The decision passed by 10 votes to two; the dissenters favoured a quarter-point rise. The Fed said inflation remained elevated and that it needed more information before deciding how to return it to its 2 per cent goal. September’s consumer price index had risen 3.7 per cent over the year, while energy prices rose 20.4 per cent and petrol prices 34.2 per cent.

In an opinion article, Michael Faulkender and Jeff Schlagenhauf argue that the Fed was right to hold rates because higher borrowing costs cannot directly increase oil supplies or reverse an energy price shock. They calculate that inflation would look much closer to the Fed’s target if energy and energy-intensive items had risen at a more typical rate. That calculation is their own interpretation of the data, rather than an official inflation measure. The policy question is whether the rise in energy costs will fade or spread into other prices and wages; the Fed’s two dissenting members judged that the inflation risk warranted a rise now.