US Fed keeps interest rates unchanged at 3.75-4% citing elevated global uncertainty; inflation concerns remain

“The committee decided to maintain the target range for the federal funds rate at 3-3/4 to 4%, in support of the Federal Reserve's dual mandate. The committee is continuing its policy of maintaining ample reserves in the banking system,” according to the FOMC statement.

The central bank’s decision to keep interest rates on hold comes against the backdrop of elevated uncertainty due to the geopolitical developments in West Asia, despite inflation concerns looming over the American economy.

October rate hold comes right after the US Fed, in its September meeting, decided to carry out its first interest rate hike in more than three years. Last month, the central bank raised the rates by 25 basis points to the range of 3.75% to 4%.

Unlike the unanimous rate hike in September 2026, this time two members out of the total 12 people on the FOMC voted against keeping the interest rates unchanged at the current levels in the October meeting.

US Fed FOMC members Lisa D. Cook and Beth M. Hammack voted to raise the key interest rates by 25 basis points to the range of 4% to 4.25% in the October monetary policy meeting. However, the remaining 10 people voting for a rate hold made the final call.

With the borrowing rates on hold, Wall Street investors are now focused on the upcoming US midterm elections, which are scheduled for next week.

What’s in focus next?

The US Federal Reserve has now entered a wait-and-watch mode as the committee indicates that it is looking forward to further data accumulation, which will potentially help determine the policy trajectory to achieve its dual mandate.

The central bank is targeting to ensure that inflation returns to the target level of 2%, with the committee focusing on delivering price stability in the economy.

Bureau of Labor Statistics (BLS) data showed that CPI inflation for the US economy was hotter than expected, surging to 3.7% as of September 2026, in comparison to 3.4% in the month of August 2026.

Key focus now remains on countering inflation risk in the economy, with aims to contain the rallying prices and aid the labour market amid crude oil prices hitting fresh near-term highs in the global market.

“Economic activity is expanding at a strong pace. While uncertainty remains elevated owing, in part, to geopolitical developments, domestic spending has been resilient. Productivity growth is strong, and capital investment is robust. Job gains have kept pace with the workforce, and the unemployment rate has changed little,” the FOMC said.

As per the September 2026 data, the unemployment rate in the country surged to 4.2%, from earlier 4.1% levels in the 12-month period ended August 2026, according to the BLS website.

US stocks trade higher

US equity market indices were trading higher during the session on Wednesday, October 28, as investors focused on the Fed’s interest rates coming in line with market expectations amid momentum in tech and chipmaking stocks.

MarketWatch data showed that the Dow Jones Industrial Average was trading 0.26% higher at 52,514.24 points on Wednesday’s market, in comparison to 52,377.57 points at the previous equity market close.

The S&P 500 index was trading 0.21% higher at 7,738 points on October 28, in comparison to 7,722.60 points at the previous US equity market close, as per the exchange data.

The tech-heavy Nasdaq 100 index was trading 0.36% higher at 29,758 points during the trading session on Wednesday, compared to 29,651.44 points at the previous Wall Street close.