Updated October 26, 2026, 8 a.m. ET
The cost of living remains a top concern for voters as they prepare to cast their ballots on Nov. 3 — and for Federal Reserve officials as they head into their final meeting before the midterm elections.
After voting unanimously in September to raise short-term interest rates for the first time in three years to combat stubborn inflation, the question is whether – and when – the Fed will do it again. The central bank generally raises the range to slow the pace of price increases and lowers it to stimulate the labor market. Despite the Trump administration’s hopes for an interest rate cut and although the September jobs report disappointed forecasters, most say an interest rate cut is unlikely at this month’s meeting.
Instead, the Federal Open Market Committee is debating whether to increase or pause. They could raise the range again and make borrowing more expensive for households or keep it stable and risk allowing inflation to remain high.
Since their last meeting, several central bank officials have said they remain concerned about inflation, and Fed Chairman Kevin Warsh has reiterated his commitment to ensuring price stability.
“It’s hard to talk to central bankers without comparing notes and hearing the same thing about the price surge,” Warsh said during a fireside chat Oct. 16 in Bangkok.
But forecasters are not convinced that Fed policymakers will increase the range at the end of their two-day meeting on October 28. Most traders are betting that policymakers will pause this month and approve a quarter-percentage-point increase in December, according to CME FedWatch.
The arguments for a break
Almost all economists polled by Reuters agreed with traders. The vast majority, 94 out of 100 respondents, expect the target range to remain between 3.75% and 4% this month, and all 100 respondents expect a rate increase in December.
One reason for patience may be that changes in monetary policy take time to impact the economy. Holding steady in October would give officials more time to assess responses to the latest surge.
“My colleagues and I will have to make our own judgments, which may take longer,” Philip Jefferson, vice chairman of the Fed’s Board of Governors, said in a speech on October 1 at the University of Virginia.
Waiting could also give officials a clearer view of the economic outlook after the midterm elections. Given that Fed officials routinely say their decisions are driven by data and not politics, the argument for a pause may be less about avoiding a politically unpopular hike before the election and more about whether their results could change policies affecting inflation.
One of the biggest uncertainties remains the war in Iran. President Donald Trump said in September that it would “end immediately” after the midterm elections, although he also suggested he could resume strikes against Iran after November 3.
“Are we going to escalate or de-escalate? “It’s huge in terms of the impact on energy prices and therefore inflation, and that’s what it all depends on,” said Yuval Bar-Or, a finance professor at Johns Hopkins University. “To speculate without recognizing that this is a pivotal event would be incomplete, and that is why, especially for me, I am now in wait and see mode.”
The arguments in favor of a hike
In September, most members of the rate-setting committee signaled that at least one more hike would be coming this year.
Although only 12 people are eligible to vote, the committee is made up of 19 members. War, As usual, he did not submit his own projections for rate developments last month, but his colleagues did. Two of them do not see the need for further increases, but 12 believe that an additional quarter-point increase is possible and four believe that two quarter-point increases or one half-point increase would be appropriate before the end of 2026.
Since then, policymakers have learned that consumer prices rose 3.7% in September from a year earlier. That’s up from 3.4% in August, the last inflation figure available when they approved a hike last month. Both numbers are well above the Fed’s 2% target.
“With each passing month, persistently high inflation increases the risk that an inflationary mentality will take root in the economy,” Cleveland Fed President Beth Hammack said Oct. 12 at the annual meeting of the National Association of Business Economics. “Tuning the sails through small, frequent adjustments reduces the risk of drifting, developing an inflationary mindset, and taking longer to reach the destination.”
Chicago Fed President Austan Goolsbee, a non-voting member of the FOMC, also worries that inflation will decline on its own.
“The danger is that inflation comes less from things that might naturally go away, like the price impacts of tariffs, and moves more toward just old-fashioned overheating of demand,” he told NPR earlier this month.
Trump still wants to remove two members from the FOMC
Trump’s call for two voting members, Gov. Lisa Cook and former Chair Jerome Powell, to leave the FOMC is also on the agenda for the Fed’s October meeting.
The president first attempted to fire Cook in August 2025 over allegations that she committed mortgage fraud four years earlier. Cook denied any wrongdoing and took her case to the Supreme Court, which blocked her removal from the committee and said Trump could only fire her “for good reason.”
Trump revived his efforts this month, establishing a “commission of inquiry” into the allegations and demanding that Cook testify before it at the White House on November 5. In a letter shared with The Associated Press, his lawyer, Father Lowell, called the commission “blatantly biased” and said Cook could appear before it after the Fed’s December meeting.
Trump and Powell clashed repeatedly over interest rate policy and a costly overhaul of the central bank’s headquarters in Washington before Warsh replaced him as Fed chief in May. After the Fed’s independent inspector general said late last month that there was no evidence that Powell violated the law while overseeing the renovation, Trump said he had asked Attorney General Todd Blanche to “study the report” and that Powell should “be forced to resign” anyway.
Powell, whose term at the Fed does not end until January 2028, has not publicly commented on Trump’s latest comment but said in March that he planned to stay at the FOMC until the administration’s investigation into him is “really finished.”
Contact Rachel Barber atrbarber@usatoday.com and follow her on X @rachelbarber_
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