Full Breakdown
Fed Likely to Hold Rates as Inflation Rises and Midterms Loom
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In this breakdown
01
Core Event
The Federal Reserve is expected to keep its benchmark interest rate unchanged on Wednesday, despite a recent acceleration in consumer-price inflation and the approach of the U.S. midterm elections. Market participants assign roughly a 90 % probability that the Fed will hold rates, while the odds of a quarter-point hike at the December meeting stand at about 75 % according to CME Group’s FedWatch Tool.
02
Background & Context
In September the Fed raised its key rate by a quarter-point—the first increase in three years—moving the target range to 3.75 %–4 %. Inflation for September was reported at 3.7 % year-over-year, above the Fed’s 2 % goal, and monthly CPI gains of 0.3 % in both August and September suggest persistent upward pressure. The U.S. labor market remains tight, with unemployment at 4.2 % and job additions falling to 29,000 in September.
03
Data & Statistics
Swipe across the table to see all columns.
| Indicator | Latest Figure |
|---|---|
| Benchmark rate range | 3.75 %–4 % |
| September CPI YoY | 3.7 % |
| September PCE YoY (forecast) | 3.6 % |
| Core PCE YoY (forecast) | 3.1 % |
| Unemployment rate | 4.2 % |
| September job gains | 29,000 |
| 10-year Treasury yield | 5.0134 % |
| 2-year Treasury yield | 4.7494 % |
| 30-year Treasury yield | 5.3200 % |
| Average 30-year mortgage rate (peak) | 7.4 % |
04
Official Statements & Responses
Federal Reserve Chairman Kevin Warsh is expected to reiterate the Fed’s goal of returning inflation to 2 % during his post-decision news conference. Bank of America’s Aditya Bhave warned that complacency about above-target inflation could delay a return to 2 % until a recession occurs. Deutsche Bank Research noted that the midterm election may influence the Fed’s calculus, but it is not a primary consideration.
05
Conflicting Reports & Gaps
Different inflation gauges present slightly divergent year-over-year rates: CPI shows 3.7 % while the PCE price index is forecast at 3.6 %. Core PCE, which excludes food and energy, is projected at 3.1 %. The sources do not resolve which measure the Fed will prioritize.
06
Verbatim Quotes
- “LOWER THE INTEREST RATES FOR THE UNITED STATES OF AMERICA, AND FAST!” — Donald Trump, president
- “Unless the Fed takes this problem more seriously and stops essentially making excuses about inflation, I think we're not going to get back to 2% until the next recession,” — Aditya Bhave
07
What’s Next
After the Wednesday decision, Chairman Warsh will hold a roughly 30-minute press conference and outline expectations for the December meeting. The U.S. government will release the July-September GDP report on Thursday, with forecasts of 3 % annualized growth. Internationally, the Bank of Canada is slated to raise its key rate to 2.5 %, while the European Central Bank and the Bank of Japan are expected to hold rates steady.