Fed Holds Interest Rates at 3.75%–4% in 10–2 Vote

The US Federal Reserve held its benchmark interest rate steady on Wednesday, October 28, 2026, keeping the federal funds target range at 3.75% to 4%. The decision, taken less than a week before America’s midterm elections, was approved by a 10–2 vote of the rate-setting Federal Open Market Committee (FOMC), with two officials dissenting in favour of a further quarter-point increase.

A divided committee holds fire

The hold was widely expected. It follows a quarter-point rate hike at the September 15–16 meeting — the first increase in three years — which had lifted the range to its current level. This time, Fed Governor Lisa Cook and Cleveland Fed President Beth Hammack both dissented, preferring to raise the target range by another 25 basis points immediately. Cook’s dissent was her first on a policy decision, and she is currently the target of a removal attempt by President Donald Trump.

In its policy statement, the committee said inflation “remains elevated” and pledged that it “will deliver price stability.” The statement added: “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% goal.” The Fed upgraded its assessment of the economy from “solid” to “strong,” noting resilient domestic spending, strong productivity growth and robust capital investment, while job gains were described as keeping pace with the workforce and the unemployment rate as little changed.

Why the Fed waited

The central bank is caught between two pressures. On one side, consumer price inflation accelerated to 3.7% year-on-year in September, up sharply from 2.4% in February, just before the war with Iran began — well above the Fed’s 2% target. Prices rose 0.3% month-on-month in both August and September, a pace that, if sustained, would keep inflation far above target. On the other side, officials want more time to judge the effect of September’s hike and to see how the November 3 midterm results affect the outlook for the Iran war, a major driver of this year’s inflation.

Fed Chair Kevin Warsh told reporters after the decision that the period ahead is “information-rich,” saying: “There’s a lot happening in the world. My colleagues and I are keen to take notice of it.” The Fed also announced that one scheduled meeting in 2027 will be devoted entirely to “broad monetary policy strategy,” meaning one fewer rate decision next year.

What it means for markets — and Pakistan

Traders took the pause as a sign that the next move is still more likely up than down. According to CME FedWatch, markets are now even more confident of another quarter-point increase at the Fed’s final meeting of the year in December. A higher US rate path typically strengthens the dollar and raises borrowing costs worldwide — a direct concern for Pakistan, where fuel import bills and dollar-denominated debt are already under pressure from elevated global oil prices.Read how the US–Iran war has already cost Washington over $47 billion and how petrol prices in Pakistan rose again on October 29

The Fed’s statement notably dropped the kind of forward guidance Chair Warsh has said he wants to avoid, leaving the December decision genuinely open to incoming data. With inflation still elevated, geopolitical uncertainty high, and the midterms days away, the world’s most important central bank has chosen to wait — but the two dissents show that the hawks inside it are not prepared to wait for long.

Sources: Reuters via Nikkei Asia, Anadolu Agency, USA Today — October 28, 2026.