WASHINGTON — Federal Reserve policymakers have telegraphed they will not raise US short-term borrowing costs again this week, but with inflation concerns still front and centre, investors believe a rate-hike pause will not last for long, Reuters reported on October 26.
Source: Reuters (Ann Saphir, Oct 26, 2026) via KTWB
Data due just one day after the Fed's anticipated decision to hold rates steady in the 3.75%-4.00% range will underscore why, Reuters said: inflation picked up last month and broadened well beyond rising fuel prices, and US economic growth accelerated last quarter, powered by solid consumer spending and surging business investment driven by demand for AI. The labour market has been stable, with unemployment at 4.2% last month.
Source: Reuters (Ann Saphir, Oct 26, 2026) via KTWB
Analysts say a second straight increase this week would have been in the cards were it not for a sharp rise in US Treasury yields in the weeks following the Fed's September rate hike. Fed policymakers were 'spooked' by a rise in 10-year Treasury yields to near-quarter-century highs, Nationwide Chief Economist Kathy Bostjancic said, and officials including New York Fed President John Williams and Fed Vice Chair Philip Jefferson signalled the Fed is content to wait for more data. 'The data, in my opinion, do support a rate hike,' Bostjancic said, adding that inflation 'deteriorated, it went the wrong way.' Financial markets slashed bets on a hike, with rate futures pricing a 90% chance of a hold at the October 27-28 meeting as of Friday.
Source: Reuters (Ann Saphir, Oct 26, 2026) via KTWB
The expected hold follows the Reuters poll of October 16-20, in which 94 of 100 economists expected the Fed to hold at 3.75%-4.00% in October and all 100 expected a hike in December, after the Federal Open Market Committee unanimously raised rates by 25 basis points in September.
Source: Reuters poll (Oct 20, 2026) via Kitco News
Chair Kevin Warsh faces a delicate challenge ahead of the November 3 midterm elections, EY-Parthenon's Gregory Daco said: Warsh will have to dispel any impression the decision was political, while keeping alive the expectation of another hike. BMO Chief US Economist Scott Anderson said he expects a closer call than markets are pricing, at least one dissent from Cleveland Fed chief Beth Hammack, and two more rate hikes to contain inflation. September's PCE reading, the Fed's preferred gauge, is projected to have accelerated to 3.6% from 3.4% in August, economists say.