Bad newsInflation at 3.7% Keeps Fed on Edge as Two Vote for Rises
The Federal Reserve held its key rate at 3.75% to 4% on 28 October, but inflation rose to 3.7% in September and futures point to a December rise. Two officials wanted a quarter-point increase now.
Read the good side of this story
Fed Holds Rates at 3.75% to 4% as Growth Runs Strong
Inflation is still above the Fed’s goal, and the central bank’s own statement says so. The Federal Reserve held its key rate at 3.75% to 4% on 28 October, but two officials wanted a rise, and markets now expect one in December. The Fed statement says inflation “remains elevated” and that the committee needs more information to bring it back to 2%. The economy is expanding at a strong pace, which makes the hold less comfortable, not more.
Dissent for a rise
The vote was 10 to 2. Governor Lisa Cook and Cleveland Fed President Beth Hammack dissented, both preferring a quarter-point increase. NBC News reports it was Cook’s first dissent, and that September’s decision to raise rates, the first since 2023, was unanimous at 12 to 0.
Inflation rose to 3.7% in September from 3.4% in August, NBC reports. Chair Kevin Warsh said that “inflation is too high” and that energy prices “have moved higher again”. He said the Fed must stop that spreading through the economy.
| Item | What the sources say |
|---|---|
| Target range | 3.75% to 4% (unchanged) |
| Vote | 10 to 2; Lisa Cook and Beth Hammack wanted a quarter-point rise |
| September meeting | 12 to 0 to raise rates, the first rise since 2023 |
| Inflation | 3.7% in September, up from 3.4% in August (NBC News) |
| Activity | Expanding at a “strong pace” (Fed statement) |
| Q3 growth estimate | 3.4% annualised (Atlanta Fed GDPNow, via CNBC) |
Table: GoodBad. Data from the Federal Reserve statement, NBC News and CNBC, 28 October 2026.
Who pays
Higher gas, diesel and crude prices are a major driver, NBC says, and economists see the effects spreading. Two-thirds of Americans in its poll called soaring gas prices a serious problem, and more than half said conditions had changed what groceries they buy.
A rate rise adds pressure on borrowers already strained by prices. The Fed held off this time, but CNBC reports that futures pricing shows a strong chance of a December increase and possibly one or two more in 2027.
What the Fed did not say
The statement does not give a path. Warsh said politics “played no role in the decision,” as NBC quotes him, and the meeting was the last before the midterm elections. The Fed also says uncertainty is elevated, partly because of geopolitical developments. Growth is not the problem: the Atlanta Fed’s GDPNow tracker points to 3.4% annualised growth in the third quarter. The problem is that prices keep rising while it happens.
Morgan Stanley economists said future hikes will depend on incoming data. The next inflation reading therefore matters as much as any decision made in the committee room.
