US Federal Reserve Holds Interest Rates Steady

On 28 October 2026, the Federal Open Market Committee (FOMC) voted 10–2 to keep the federal funds rate target range at 3.75%–4%. The decision followed a 0.25-percentage-point increase in September 2026, the first rate hike since 2023.

Federal Funds Rate and Monetary Policy

The federal funds rate is the interest rate at which depository institutions lend reserve balances to one another overnight. The FOMC sets a target range for this rate as a principal instrument of US monetary policy. The FOMC is the Federal Reserve’s monetary policy-making body. It has 12 voting members: the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four other Reserve Bank presidents serving on a rotating basis. The Federal Reserve’s statutory objectives include maximum employment and stable prices. Its longer-run inflation goal is 2%, measured using the personal consumption expenditures price index.

Vote and Economic Assessment

The 10–2 vote included dissent from Federal Reserve Board Governor Lisa D. Cook and Cleveland Federal Reserve Bank President Beth M. Hammack. Both preferred a 0.25-percentage-point increase in the target range. The FOMC described economic activity as expanding at a “strong pace” and stated that inflation remained elevated. Federal Reserve Chairman Kevin Warsh said the pause would allow officials to gather additional information while assessing a policy stance consistent with a timely return of inflation to the 2% goal.

Rate Projections and Meeting Schedule

The September 2026 dot plot placed Fed officials’ year-end rate projections between 4.1% and 4.4%. A dot plot presents individual Federal Open Market Committee participants’ projections for the federal funds rate; it is not a binding policy commitment. Economists and market analysts expected the Federal Reserve could raise rates again at its December 2026 meeting. Warsh also announced changes to the meeting schedule, with fewer rate-setting meetings planned from 2027.

Important Facts for Exams

• The Federal Open Market Committee sets the target range for the federal funds rate.
• The FOMC has 12 voting members, including the president of the Federal Reserve Bank of New York.
• The Federal Reserve’s longer-run inflation goal is 2%, measured by the personal consumption expenditures price index.
• The dot plot records individual FOMC participants’ economic projections and does not commit the committee to a specific rate path.

Key Figures

The target range remained at 3.75%–4% after the October 2026 vote. The September 2026 increase was the first federal funds rate hike since 2023.