Federal Reserve interest rate decision: The door is wide open for further rate hikes
Summary
- The US Federal Reserve kept its policy rate unchanged at 3.75–4.00%, with a 10–2 vote, indicating a pause in the tightening cycle but leaving room for further rate hikes.
- The Fed described economic growth as strong and maintained a positive outlook on productivity and investment, while noting that inflation remains elevated.
- The central bank emphasized data dependence for future monetary policy decisions, not ruling out further hikes, and maintained its commitment to achieving price stability.
- Starting next fall, the Fed will reduce the number of rate meetings from eight to six per year, potentially increasing market volatility due to less frequent updates.
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Automatic translation: Originally published in Finnish 28/10/2026, 19:08 GMT. Give feedback here.
The US Federal Reserve kept its policy rate unchanged at 3.75–4.00% on Wednesday following the previous rate hike in September. The decision was not unanimous, and many factors suggest that the tightening cycle is merely on pause.
In September, the Fed raised interest rates by 25 basis points in a 12–0 vote. This time, rates were kept unchanged in a 10–2 vote. The dissenting votes leaned in a hawkish direction, as Lisa Cook and Beth Hammack would have wanted to raise rates by another 25 basis points. No one advocated for a rate cut, so the debate continues to be whether the current tightening is sufficient. Cook's stance is noteworthy, as she has been considered a relatively moderate voice within the central bank. Hammack's dissenting vote, known as she is for her hawkishness, was more expected.
The Fed now described economic growth as strong, whereas the word in September was solid. The description of productivity and investment also remained positive. Regarding the labor market, it was reiterated that jobs are being created at the pace of labor force growth and the unemployment rate has barely changed. According to the Fed, inflation remains elevated. Overall, the central bank's assessment of the US economy thus leaned positive.
Data dependence is back
The clearest revision in the decision concerned the guidance. In September, the Fed justified the hike by stating that it supports a faster return of inflation to the 2% target. Now, the central bank stated that it needs more information to determine the appropriate stance of monetary policy. Thus, the wording does not rule out additional hikes, and the commitment to achieving price stability remained unchanged.
In the press conference, Chair Kevin Warsh stated that the Fed's meeting practice will change next fall. From then on, the schedule will transition to six actual rate meetings per year, with two of the meetings focusing on the big picture of the economy. The number of rate meetings will thus decrease from the current eight to six per year. This will give the central bank time to assess the direction of monetary policy, but on the other hand, it will reduce information among market participants and may thus increase volatility.
It strongly appears that the Fed wants to see the effects of the September hike before its next move. However, strong growth, elevated inflation, and dissenting votes favoring tightening indicate that the direction of interest rates is still upward. The inflation and labor market figures of the coming months will determine whether another hike is seen or whether the current interest rate level is sufficient to weigh on inflation toward the target.
