Fed Holds Rates, but Two Officials Push for a Hike

Two of the Federal Reserve’s 12 voters wanted to raise rates by a quarter point on Wednesday, while the rest chose to wait. The 10-2 decision kept the key rate at 3.75% to 4%. Fed Governor Lisa Cook cast her first vote against the decision, joining Cleveland Fed President Beth Hammack, who had also backed a hike in July. ^2,6

That split came after the Fed raised rates in September for the first time since 2023. This time, officials said inflation was still high and called for more information before deciding what to do next. They described economic activity as growing at a “strong” pace, with job gains keeping pace with the workforce and unemployment little changed. The Fed committee that sets rates chooses a key rate that affects borrowing costs across the economy. ^5,7

That strong economy is colliding with stubborn price rises. Energy costs have climbed amid the US-Israel war with Iran, while tariffs and higher computer chip prices have added to inflation. The Fed faces a choice: higher rates can help cool demand and prices, but also make mortgages, car loans and business borrowing more expensive. Its decision comes just days before the November 3 midterms, as President Donald Trump presses for lower rates and efforts to remove Cook from the Fed resume. ^1,2,6

Those competing pressures leave the next move open, not settled. Some officials have indicated support for another increase later this year, and investors are watching for signs of a December hike. Fed Chair Kevin Warsh, who took office in May, is due to explain the decision at a news conference after the meeting. His remarks will help clarify what evidence could bring another rate rise. ^2,3