Fed Holds Rates Steady in Split Vote Six Days Before Midterms

WASHINGTON -- The Federal Reserve held its benchmark interest rate unchanged Wednesday, opting to pause after a September hike even as inflation continued to run above the central bank's target, and as the country heads into midterm elections next week.

The Federal Open Market Committee voted 10-2 to keep the federal funds rate in a target range of 3.75% to 4%, according to a statement issued by the Board of Governors and reviewed by ETL Newswire. The decision was in line with market expectations.

Fed Governor Lisa Cook and Cleveland Fed President Beth Hammack cast the dissenting votes. Both preferred a quarter-point hike at this meeting, the Fed said in its statement. According to reporting by Fortune, it was the first time a Fed governor and a regional bank president dissented on the same side since October 1992. It was also Cook's first dissent since she joined the board in 2022.

Fed Chair Kevin Warsh, speaking at a press conference in Washington, said the committee chose to wait for more data before moving again on rates. "The accumulation of more information will help the Committee determine the policy stance appropriate to ensure a timely return of inflation to the Committee's 2 percent goal," the FOMC said in its statement, according to CNBC.

Warsh also pushed back on any suggestion that timing played a role in the decision. "Politics played no role in the decision," he said, according to Yahoo Finance. The rate decision was the central bank's last scheduled policy vote before Nov. 3 midterm balloting.

Inflation has been trending in the wrong direction. Prices rose 3.7% in September compared with a year earlier, up from a 3.4% annual rate in August, according to ABC News. That puts inflation nearly two full percentage points above the Fed's 2% target. The September rate hike -- the first in three years -- had raised expectations that the committee was back on a tightening path.

Warsh said the recent hike's economic impact, combined with data still coming in, justified the pause, according to U.S. Bank's market analysis. The FOMC's official statement upgraded its assessment of economic activity from "solid" to "strong" but kept its view that "inflation remains elevated."

Investors widely expect the central bank to resume hiking at its December meeting, according to NPR. Some market participants on Wednesday called the hold difficult to justify. Jeffrey Gundlach, CEO of DoubleLine Capital, said on CNBC's "Closing Bell" that he thinks the Fed should be raising rates, citing the level of the two-year Treasury yield.

Separately, Warsh announced a structural change to the FOMC calendar for next year. He said one of the eight scheduled 2027 meetings will focus "exclusively on broad monetary policy strategy, with neither a vote on the federal funds rate nor a policy statement anticipated," according to CNBC. That would reduce the number of rate-setting decisions to seven for the year.

The Federal Reserve's implementation note, published the same day on the Fed's website, confirmed the Board of Governors voted unanimously to maintain the interest rate paid on reserve balances at 3.90%, effective Oct. 29, 2026.

Sources cited:
- Federal Reserve Board Implementation Note, Oct. 28, 2026 (https://www.federalreserve.gov/newsevents/pressreleases/monetary20261028a1.htm)
- Fortune (https://fortune.com/2026/10/28/fed-rates-steady-kevin-warsh-president-governor-laura-ullrich/)
- CNBC (live updates) (https://www.cnbc.com/2026/10/28/fed-meeting-today-live-updates.html)
- CNBC (rate decision) (https://www.cnbc.com/2026/10/28/fed-interest-rate-decision-october-2026.html)
- Yahoo Finance (https://finance.yahoo.com/economy/policy/live/fed-meeting-live-updates-federal-reserve-october-meeting-kevin-warsh-161129201.html)
- ABC News (https://abcnews.com/Business/federal-reserve-set-issue-interest-rate-decision-midterm/story?id=137599228)
- NPR (https://www.npr.org/2026/10/28/nx-s1-6020425/federal-reserve-interest-rates-inflation)
- U.S. Bank (https://www.usbank.com/investing/financial-perspectives/market-news/federal-reserve-interest-rate.html)