Fed Is Expected to Hold Rates Steady Wednesday, a Week Before the Midterms, but Markets Price a Hike in December

The Federal Reserve announces its next rate decision on Wednesday, and Fox Business reports that markets expect no change.

The odds. The CME FedWatch tool shows a 90.6% probability that the target range stays at 3.75% to 4%, up from 84.5% a week ago and 35.8% last month. For the mid-December meeting it shows a 75.1% chance of a quarter-point hike, and a 46.5% chance that rates will be 50 basis points higher, at 4.25% to 4.5%, by March.

Why a hold. September's consumer price index rose 0.6% on the month and 3.7% from a year earlier, well above the Fed's 2% target and hotter than expected. Heather Long, chief economist at Navy Federal Credit Union, told Fox Business that it is "a very high bar" to hike within a week of an election. The Fed says it keeps politics out of its decisions, but Fox notes policymakers tend to be hesitant to move at meetings just before an election.

Why the hike is still coming. Long said the data show the Fed needs to act again, but "it's not a five-alarm fire." She said she expects a hike in December. "The Federal Reserve will definitely hike interest rates again, probably in December," she said, with "a couple more hikes in 2027" likely. She pointed to hot inflation in used cars, airfares, recreation, auto repair and medical costs. Gas prices have eased a bit since the September highs, so October's data could be cooler, she said.

What it means for borrowers. Long said "higher-for-longer borrowing costs and mortgage rates well above 7% is going to stick around for at least a year, maybe longer."

Note for readers: the probabilities are market estimates that change daily, and the forecasts are those of one economist. The decision itself had not been announced when Fox published.