The Federal Reserve chose patience over action on Wednesday, holding its benchmark interest rate steady even as some of its own officials argued for another increase.
The Federal Open Market Committee kept the federal funds rate in a range of 3.75% to 4%, the same level it has held since a quarter-point increase in September. That September move was itself notable because it was the first rate hike the Fed had approved since 2023, a sign that policymakers have grown more worried about inflation than about a slowing job market. In its statement, the Fed said inflation remains elevated and that it wants to gather more information before deciding its next step.
The vote was not unanimous. Two of the twelve Federal Open Market Committee members, Governor Lisa Cook and Cleveland Fed President Beth Hammack, dissented because they wanted to raise rates by a quarter point immediately rather than wait. That is a real split inside the central bank about how seriously to treat price pressures that have proven more stubborn than many economists expected earlier this year.
Fed Chairman Kevin Warsh addressed reporters afterward and said he does not favor the Fed giving markets explicit forward guidance about future moves, preferring to let incoming data decide each meeting. He also announced a structural change starting in 2027: the Fed will begin setting aside one of its eight annual meetings purely for broad monetary strategy discussion, separate from the regular rate-setting meetings, with two such strategy sessions planned in 2028. Asked whether the decision to hold rates had anything to do with the approaching midterm elections, Warsh said politics played no role in the committee's thinking.
For ordinary households, the hold means little immediate change. Credit card rates, mortgage rates and auto loan rates, all of which track the Fed's benchmark to varying degrees, are likely to stay close to where they have been. Savers in high-yield accounts will keep earning similar returns for now. The bigger question hanging over the economy is whether rising energy costs and elevated inflation will eventually force the Fed's hand toward another increase.
Markets are watching closely for signals ahead of the Fed's December meeting, where futures pricing suggests investors still see a real chance of another quarter-point increase if inflation data does not improve.
Why didn't the Fed cut rates instead of holding them?
Inflation has stayed elevated this year, which has shifted the Fed's focus from supporting a slowing job market toward containing prices, leading it to hold and even raise rates rather than cut them.
Does this affect my mortgage or credit card rate?
Not immediately. Holding rates steady generally means borrowing costs tied to the Fed's benchmark will stay roughly where they have been rather than rising or falling further.