The Federal Reserve's next interest rate decision is just days away, and most traders expect it to be a quiet one after a surprising move last month.
Through late 2025, the Fed had been cutting rates, lowering its target range three times in September, October, and December to bring it down to 3.50 to 3.75 percent, where it stayed for most of this year. That changed at the Fed's September 15 and 16 meeting, when policymakers raised the range by a quarter point to 3.75 to 4.00 percent, effective September 17, after prices began heating up again. Minutes from that meeting, released October 7, showed that most officials believe one more rate increase would likely be appropriate before the end of the year. The Fed's own September projections pointed the same way, with the median official expecting the federal funds rate to finish 2026 at 4.1 percent, up from a projection of 3.8 percent back in June.
Despite that outlook, traders are not expecting a move at the meeting on October 27 and 28. As of October 20, futures markets tracked by CME FedWatch put the odds of the Fed holding steady at 3.75 to 4.00 percent at about 83 percent, with roughly a 17 percent chance of another quarter-point hike and essentially no chance of a cut. The expectation is that the Fed will wait until its final meeting of the year in December to deliver the additional increase its own officials have signaled, giving policymakers more time to see how inflation and the broader economy are trending.
The decision matters well beyond Wall Street. Rates on credit cards, home equity lines of credit, and many personal loans move with the Fed's benchmark, so a pause would mean little near-term relief or additional pain for borrowers, while a surprise hike would raise costs further just as households are also absorbing higher energy prices tied to recent events in the Middle East.
Watch for the Fed's statement and Chair's press conference on October 28 for any change in tone on inflation, and for whether officials keep the door open to a December hike.
Is the Fed expected to change rates this month?
No, traders overwhelmingly expect the Fed to hold its benchmark rate steady at its October 27 to 28 meeting.
Why did the Fed raise rates in September after cutting for months?
Inflation pressures picked back up, prompting the Fed to reverse course and raise its target range by a quarter point.