US Federal Reserve keeps interest rates unchanged

The US Federal Reserve kept its key interest rates unchanged within the 3.75% to 4.00% range, affirming that gathering more economic data and information would help determine the appropriate path for monetary policy in the coming period.

In a statement, the Fed said inflation remains high despite the continued strength of economic activity, according to Reuters, noting that the US economy continues to expand at a “strong” pace, supported by resilient domestic spending and sustained investment strength.

It clarified that job gains continued to keep pace with labor force growth, while the unemployment rate remained largely unchanged. It added that domestic spending remained solid despite elevated uncertainty levels, productivity growth posted strong performance, and capital investment remained at robust levels.

Federal Reserve Chair Jerome Powell emphasized that inflation remains above the target, stressing the need to bring it down and restore price stability. He pointed to improvements in economic growth, consumer spending strength, capital investment, and productivity, describing labor market conditions as positive.

Powell said at a press conference following the Open Market Committee meeting that the central bank intends to reduce the number of meetings dedicated to voting on interest rates, reserving some meetings for discussing the overall monetary policy strategy rather than making rate decisions.

He explained that the Board views eight annual meetings as appropriate, adding that in 2027, one meeting will be dedicated exclusively to discussing monetary policy strategy, without voting on interest rates or issuing a policy statement.

For 2028, Powell anticipated two meetings dedicated to discussing monetary strategy, with the remaining six meetings focused solely on setting interest rates. He noted it remains unclear what the Fed will announce following the strategic meetings, with further details to be provided later, and that the topic has been extensively discussed over several previous meetings.

Traders largely expected the central bank to keep interest rates unchanged in the 3.75% to 4% range, but they see an 84% probability of a rate hike in December, according to CME Group’s FedWatch tool.

Focus will also be on US personal consumption expenditures data, which may provide further clarity on the monetary policy path, according to Reuters.

The Open Market Committee meeting, responsible for managing monetary policy at the Federal Reserve, began yesterday and concluded today, less than two weeks before the US midterm congressional elections, where rising prices and affordability have emerged as key issues in the electoral contest. Consumers generally express frustration over rising fuel, grocery, clothing, and other prices.

The Federal Reserve targets reducing US inflation to 2%, a goal typically achieved by raising key interest rates. Higher interest rates can, over time, slow consumer spending and dampen inflation, according to the Associated Press.

US President Donald Trump criticized the Federal Reserve for raising interest rates last month, although he broadly criticizes the Open Market Committee responsible for setting rates, rather than Powell, whom he appointed to succeed former Chair Jerome Powell.

Warsh also faces some of the drivers of growth, particularly the massive spending and rapid expansion of artificial intelligence infrastructure, as well as rising energy prices, which cannot be easily curbed through interest rate hikes.

At the same time, parts of the U.S. economy have already been hurt by higher interest rates, which rose due to market forces even before the Federal Reserve decided to raise its key interest rate last month.

The average interest rate on 30-year mortgage loans rose to 7.4% earlier this month, marking its highest level in about three years, although it declined slightly afterward.

U.S. stocks rose for the third consecutive session at the close of trading on Wednesday, after the Federal Reserve kept interest rates unchanged as expected, while investors awaited earnings results from Microsoft and Alphabet, the parent company of Google.

At the close of trading, the Dow Jones Industrial Average rose 0.19%, or 97 points, to 52,475 points. The broader S&P 500 index gained 0.28%, or 21 points, to 7,743 points, posting gains for the third consecutive session. The Nasdaq Composite also rose 0.27%, or 72 points, to 26,549 points.

On the other side of the Atlantic, the Euro Stoxx 600 index remained flat at 644 points. The UK’s FTSE 100 index stayed steady at 10,694 points, and France’s CAC 40 index held at 7,886 points. Germany’s DAX index rose 0.44% to 25,704 points.

Key points from Warsh’s remarks during a press conference following the decision to hold interest rates steady:

• Economic growth has strengthened, while inflation remains elevated and above the target level for about six years.

• Overall financial conditions have become more restrictive, but I cannot—nor do I wish to—describe them as fully restrictive.

The core Personal Consumption Expenditures (PCE) price index in the United States, the Federal Reserve’s preferred measure of inflation, rose in September, according to data released yesterday by the Bureau of Economic Analysis.

According to the data, the core index—which excludes volatile food and energy prices—stood at 3.1% year-on-year in September, compared to 3.0% in August.