3.7% Inflation: Fed Expected to Hold Rates Steady Before Midterms

The Federal Reserve is expected to leave its benchmark interest rate unchanged on Wednesday, the central bank's last scheduled rate decision before next week's midterm elections, according to the Guardian's Oct. 28 report. A pause would keep rates at one of the highest pre-election levels in more than 20 years, the Guardian reported, a month after the central bank raised rates for the first time since 2023.

Why Is the Fed Expected to Pause This Week?

Fed officials raised rates last month for the first time since 2023, citing inflation that has stayed above the central bank's 2% target for years, the Guardian reported. Multiple Fed leaders have signaled room for a pause even though most Fed economists are still predicting one more increase before year-end, according to the report. Fed governor Christopher Waller said this month that "the hikes do not need to come at consecutive meetings, but they should be in place in an acceptable period of time," the Guardian reported.

How High Is Inflation Right Now?

Annualized inflation climbed to 3.7% in September from 3.4% in August, the Guardian reported. That reading marks the highest level since spring, according to the report, and keeps the rate nearly double the Fed's 2% target. For most of 2026, annualized inflation has stayed above 3%, the Guardian said.

What Is Driving Prices Higher?

Rising prices this year have largely been driven by the war in the Middle East involving Iran, the Guardian reported. Oil prices have surged with the closure of the Strait of Hormuz, a key trade passageway, and crude traded briefly above $117 a barrel this week, according to the report. The energy shock tracks with a broader commodity trend: the World Bank projected a 23% rise in commodity prices for 2026 in a separate Oct. 28 analysis, underscoring how supply disruptions have pushed costs higher across markets beyond oil alone.

What Has Trump Said About the Rate Hike?

President Trump said interest rates "should be 1% or less," the Guardian reported, after last month's increase. The September rate hike "infuriated" Trump, according to the Guardian's account, putting the central bank's independence back in the spotlight ahead of the vote.

Why Does the Timing Matter for the Midterms?

NYU Stern economist Nicholas Economides told the Guardian the Fed is unlikely to "take any radical action" so close to the election. "Even if the Fed were to do something radically different, the economy would not have time to adjust before the elections," he said, according to the report. Interest rates set by the Fed affect the cost of borrowing on credit cards, mortgages and some savings accounts, the Guardian noted, meaning any shift could ripple through household budgets just as voters head to the polls.

What To Watch After Wednesday's Decision

• Whether the Fed signals a further rate hike before year-end, as most Fed economists currently expect, according to the Guardian.
• Whether the next inflation reading, due before the Fed's following meeting, shows prices accelerating further above the 3.7% September rate.
• Whether oil prices hold above the $117-a-barrel level reached this week amid the Strait of Hormuz disruption.
• Whether Trump continues pressing publicly for rates near 1%, a level far below the current benchmark.

How Does a Rate Pause Affect Household Borrowing Costs?

Interest rates set by the Fed determine the cost of borrowing on loans across the economy, including credit cards, mortgages and some savings accounts, the Guardian reported. During periods of high inflation, raising rates can slow the pace of price increases, according to the report, which is why the central bank moved last month despite the political backlash that followed. A pause this week would leave borrowing costs at their current level rather than pushing them higher, giving households and businesses a static rate environment through Election Day rather than a shifting one.

The mechanism works in the other direction as well: holding rates steady does nothing to counter the 3.7% inflation reading, meaning price pressure on consumers continues unless the war-driven energy shock eases on its own. Oil traded briefly above $117 a barrel this week, according to the Guardian, its highest price in recent memory, before the Fed's Wednesday decision. That level, tied to the closure of the Strait of Hormuz, has fed directly into the inflation data that pushed the Fed to raise rates in September for the first time since 2023.

The decision also lands against the backdrop of the World Bank's projection of a 23% rise in commodity prices for 2026, reported separately by HTT News on Oct. 28, suggesting the inflation pressure facing the Fed extends beyond oil markets into a wider set of goods tracked by the World Bank's dataset.

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