Fed Set to Hold Rates as Inflation Stays Sticky and Politics Looms Before Midterms
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Federal Reserve officials are likely to keep benchmark interest rates unchanged this month, saying they need more time to judge financial conditions and avoid any hint of influencing the midterm elections.
The Federal Reserve is meeting in Washington this week to decide on interest-rate policy as inflation remains a central issue for the U.S. economy and the upcoming midterm elections. Market expectations and Fed officials suggest that the benchmark rate will stay unchanged on Wednesday.
Fed Vice Chair for Supervision Michelle Bowman said that inflation is still above the Fed’s target and that the central bank has "some time to wait and see how financial conditions evolve before we take more action." Similarly, San Francisco Fed President Mary Daly noted that she does not feel an urgent need to decide with limited information, adding that the Fed has "the time that we need."
The last rate increase, a 0.25-percentage-point hike in September, followed a series of inflation readings above the 2% goal. September’s annual inflation rate rose to 3.7% from 3.4% the month before, prompting Fed Chair Kevin Warsh to describe inflation as "too high and has been for too long."
Analysts at Deutsche Bank argued that skipping a rate hike in October is not strongly justified, but they also warned that raising rates close to Election Day could appear politically motivated and potentially affect voter sentiment.
Polls show that rising prices, especially for housing and energy, are top concerns for voters ahead of the election. A recent NBC News poll indicated low approval ratings for President Donald Trump’s handling of the cost of living and foreign policy, with 27% and 29% approval respectively. Two-thirds of respondents described soaring gas prices linked to the Iran conflict as a serious problem.
White House National Economic Council director Kevin Hassett described the latest inflation figure as "disappointing" and said the administration is still trying to understand why voters remain dissatisfied with the economy despite higher spending.