Fed Holds Rates at 3.75%-4% Days Before Midterms; Two Officials Dissent in Favor of Hike

The Federal Reserve held its benchmark rate at 3.75% to 4% on Wednesday, pausing after September's first hike in three years, but the 10-2 split saw Governor Lisa Cook and Cleveland Fed President Beth Hammack vote for another quarter-point increase. The decision lands less than a week before US midterms, with inflation at 3.7% and markets pricing an 87.5% chance of a December hike, up from 73% Tuesday, per CME Group's FedWatch tool. The statement said "inflation remains elevated" and that more information would help determine the stance needed "to ensure a timely return of inflation" to the 2% target. The Fed upgraded its economic view to "expanding at a strong pace" from "solid" in September, while dropping references to the Middle East conflict and energy supply shocks. Cook's dissent comes as President Donald Trump seeks her removal over mortgage fraud allegations she denies; a three-person committee is expected to hear her next week. September CPI rose 3.7% year-over-year, core inflation reached 2.6%, and the average 30-year mortgage rate hit a three-year peak of 7.4% in early October. Chair Kevin Warsh announced the FOMC will hold seven rate-setting meetings in 2027 and six in 2028, dedicating others to strategy.