Fed set to hold interest rates steady in last decision before midterms
The Federal Reserve is expected to keep interest rates unchanged at its final rate-setting meeting before next week’s US midterm elections. A pause would suggest officials are waiting to assess inflation, while the cost of living is a major concern for voters and could influence which party controls Congress.
The Fed raised rates last month for the first time since 2023, as annual inflation reached 3.7% in September, up from 3.4% in August and above its 2% target. Oil prices, driven higher by the conflict involving Iran and disruption to the Strait of Hormuz, have added to price pressures; crude briefly topped $117 a barrel this week. Some Fed officials see room to pause, though many economists expect another increase before year-end, and one economist cautioned that rate rises may do little to address inflation caused by supply disruptions.
In short
- The Fed is expected to hold rates before the midterms.
- September inflation rose to 3.7%, above the 2% target.
- Officials may pause now but raise rates again later.
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The case for
Holding rates steady would give the Fed time to judge whether inflation is becoming persistent or is mainly reflecting temporary supply shocks, such as disrupted oil flows. Since higher borrowing costs can slow hiring and investment and may do little to ease a supply-driven price rise, a pause could avoid unnecessary economic damage while officials gather more evidence.
The case against
With inflation rising further above the Fed’s target and energy costs adding pressure, holding rates could allow price increases to become more entrenched and harder to reverse. A further increase could reinforce confidence that the Fed is committed to price stability, even if it cannot directly resolve supply disruptions, and help protect households from prolonged inflation.
Explained simply
The Federal Reserve, often called the Fed, is the US central bank. It sets a key interest rate that influences borrowing costs across the economy, including for mortgages, credit cards and businesses. Its decisions aim to keep prices stable while supporting employment.
Higher rates can make borrowing more expensive and may slow spending, which can reduce inflation over time. But they do not directly increase the supply of goods or oil, so their effect can be limited when prices rise because of shortages or disruption. Inflation and the cost of living are important concerns for US voters, and all seats in the House of Representatives and about a third of Senate seats are contested in midterm elections.
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