The cost of living remains top of mind for voters as they prepare to cast their ballots on Nov. 3 — and for Federal Reserve officials as they head into their final meeting before the midterm elections.
After unanimously voting in September to raise the benchmark for short-term interest rates for the first time in three years to combat stubborn inflation, the question is whether — and when — the Fed will do it again. The central bank generally raises the range to slow the pace of rising prices and lowers it to stimulate the job market. Despite the Trump administration's hopes for lower rates, and although the September jobs report disappointed forecasters, most believe a cut is an unlikely outcome from this month's meeting.
Instead, the Federal
Open Market Committee is weighing whether to hike or pause. They could raise the range again and make borrowing more expensive for households or hold it steady and risk allowing inflation to remain high.
Since their last meeting, several central bank officials said they're still concerned about inflation, and Fed Chair Kevin Warsh recommitted to delivering price stability.
"It's hard to be in a discussion with central bankers and not compare notes and hear the same thing about the surge in prices," Warsh said during an Oct. 16 fireside chat in Bangkok.
But forecasters aren't convinced Fed policymakers will raise the range at the end of their two-day meeting Oct. 28. Most traders are betting policymakers will pause this month and approve a quarter percentage point increase in December, according to CME FedWatch.
The case for a pause
Nearly all economists polled by Reuters are in alignment with traders. The vast majority, 94 of 100 surveyed, expect the target range to remain at 3.75% to 4% this month, and all 100 expect a December rate increase.
One reason for patience may be that monetary policy changes take time to filter through the economy. Holding steady in October would give officials more time to assess responses to the last hike.
"My colleagues and I will need to come to our own judgment, which may take more time," Philip Jefferson, vice chair of the Fed's Board of Governors, said in an Oct. 1 speech at the University of Virginia.
Waiting may also give officials a clearer view of the economic outlook after the midterms. Because Fed officials routinely say their decisions are driven by data, not politics, the argument for a pause may be less about avoiding a politically unpopular hike ahead of elections than about whether their results could change policies affecting inflation.
One of the largest uncertainties remains the war in Iran. President Donald Trump said in September it would "end immediately" following the midterms, though he has also suggested he may resume strikes against Iran after Nov 3.
"'Are we going to escalate or de-escalate?' is huge in terms of impact on energy prices and therefore inflation, and that's what everything hinges on," Yuval Bar-Or, a finance professor at Johns Hopkins University said. "Speculating without recognizing that that's a pivotal event would be incomplete, and that's why, in particular for me, I'm now in the mode of waiting and seeing."
The case for a hike
In September, most members of the rate-setting committee signaled at least one more hike is coming this year.
Although just 12 get to vote, the committee is made up of 19 members. Warsh, as usual, didn't submit his own projections for the rate path last month, but his colleagues did. Two saw no need for further increases, but 12 saw room for one more quarter-point hike and four felt two quarter-point increases or one half-point increase would be appropriate before the end of 2026.
Since then, policymakers learned that consumer prices rose 3.7% in September from a year earlier. That's up from 3.4% in August, the latest inflation reading available when they approved a hike last month. Both figures are well above the Fed's 2% target.
"With each passing month, persistently elevated inflation raises the risks of an inflationary mindset becoming entrenched in the economy," Cleveland Fed President Beth Hammack said Oct. 12 at the National Association of Business Economics' annual meeting. "Trimming the sails through frequent smaller adjustments reduces the risks of being blown far off course, of an inflationary mindset taking hold, and of taking longer to reach the destination."
Chicago Fed President Austan Goolsbee, a nonvoting member on the FOMC, also worries that inflation may not ease on its own.
"The danger is that the inflation is less coming from things that might naturally go away, like tariff impacts on prices, and is shifting more to just old-fashioned overheating of demand," he told NPR earlier this month.
Trump still wants two members off the FOMC
Also looming over the Fed's October meeting are Trump's calls for two voting members, Governor Lisa Cook and former Chair Jerome Powell, to leave the FOMC.
The president first attempted to fire Cook in August 2025 over allegations she committed mortgage fraud four years earlier. Cook denied any wrongdoing and took the fight to the Supreme Court, which blocked her removal from the committee and said Trump could only fire her "for good reason."
Trump revived his effort this month, establishing a "committee of inquiry" into the allegations and demanding Cook testify before it at the White House on Nov. 5. In a letter shared with the Associated Press, her lawyer Abbe Lowell called the committee "demonstrably biased" and said the earliest Cook could appear before it is after the Fed's December meeting.
Trump and Powell repeatedly clashed over interest rate policy and a pricey overhaul of the central bank's Washington headquarters before Warsh replaced him as Fed chair in May. After the Fed's independent inspector general said late last month there was no evidence Powell violated the law while overseeing the renovation, Trump said he asked Attorney General Todd Blanche to "study the report" and that Powell should "be forced to resign" anyway.
Powell, whose term at the Fed does not end until January 2028, has not publicly addressed Trump's latest comment but said in March he planned to remain on the FOMC until the administration's investigation into him is "truly over."
Reach Rachel Barber at rbarber@usatoday.com and follow her on X @rachelbarber_
This article originally appeared on USA TODAY: Why the Fed may hold off on another rate hike despite high inflation
