Fed to announce rate decision ahead of midterm elections amid persistent inflation

The Federal Reserve will release its latest interest-rate decision on Wednesday, less than a week before the upcoming midterm elections. Officials say they aim to keep monetary policy independent of political considerations, which can make rate moves before an election more cautious.

September’s consumer price index showed headline inflation rising 0.6% month-over-month and 3.7% year-over-year, well above the Fed’s 2% target. Heather Long, chief economist at Navy Federal Credit Union, told Fox Business that the data “increased the chance of an October rate hike, but it’s a very high bar to increase in October, they would do it within a week of the election.” She added that the Fed could wait until December to act, noting that gas prices have eased since September’s peak.

Market pricing reflects a strong expectation of a hold, with the CME FedWatch tool indicating a 90.6% probability that rates will stay in the 3.75%-4% range. The same tool shows a 75.1% chance of a 25-basis-point hike at the December meeting, and a 46.5% probability of rates rising another 50 basis points by March if inflation remains elevated.

Long said the Fed is likely to hike again in December and warned that “it could take a couple more hikes in 2027,” suggesting that higher borrowing costs may persist for an extended period.