The US Federal Reserve is widely expected to keep interest rates unchanged at its upcoming meeting next week, despite persistent inflation concerns. The Federal Open Market Committee (FOMC) will convene over two days, with the decision announcement scheduled for 2:00 pm local time (18:00 GMT) on Wednesday. The Fed has struggled to meet its two-percent inflation target for over five years, and its last rate hike in September raised the federal funds rate to a range of 3.75 percent to 4.0 percent.
The meeting comes just days before the US midterm elections on November 3, where the Democratic Party aims to regain control of Congress from President Donald Trump's Republicans. Trump has previously criticized the Fed's rate policies but has not targeted current Chair Kevin Warsh over the issue. The Fed's preferred inflation gauge, the PCE price index, peaked at 7.2 percent in 2022 before easing to around 2.2 percent by late 2024, only to rise again to 3.9 percent in May due to Trump's economic policies and global tensions.
Analysts suggest the Fed may hold rates steady to avoid political entanglement ahead of the elections. Loretta Mester, former head of the Cleveland Fed, emphasized that the Fed's decisions are based solely on economic data, not political considerations. She noted that inflation remains above target and the labor market is stable, arguing for further rate hikes. Wendy Edelberg of the Brookings Institution believes the Fed would prefer to avoid political discourse before the election, with December being a more neutral time for a potential rate increase.
Trump has intensified his assault on the Fed's independence since returning to power, launching a criminal probe against former Chair Jerome Powell and attempting to remove Fed Governor Lisa Cook. The probe against Powell was dropped to facilitate Warsh's confirmation, but the effort to fire Cook continues despite a Supreme Court ruling against it. Cook recently declined to participate in a White House investigation into mortgage fraud allegations she denies.