Fed Expected to Hold Rates at 3.75%-4.00% This Week as Inflation Pressures Persist

Federal Reserve policymakers are expected to leave U.S. short-term borrowing costs unchanged at this week's October 27-28 meeting, holding the benchmark rate in the 3.75%-4.00% range, though investors anticipate the pause will be short-lived amid persistent inflation concerns. Rate futures priced a 90% chance of a hold as of Friday. Data due a day after the decision are expected to show inflation accelerated and broadened beyond fuel prices last month, while economic growth accelerated last quarter on solid consumer spending and AI-driven business investment. The unemployment rate stood at 4.2% last month. Analysts said a second straight hike would have been likely absent the sharp rise in Treasury yields following September's increase, which pulled the 10-year yield to near-quarter-century highs. Nationwide Chief Economist Kathy Bostjancic said the data "do support a rate hike." BMO's Scott Anderson expects the October decision to be "a closer call" than markets are pricing and forecasts two more hikes, with a possible dissent from Cleveland Fed chief Beth Hammack. A November 3 election adds political sensitivity to Chair Kevin Warsh's communication.