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Federal Reserve Set to Decide on Interest Rates Amid Inflation Concerns

Updated 2:06 PM ET · 7:15 AM ETConfirmed

Business Desk

In Short: The Federal Reserve is set to issue an interest rate decision on Wednesday amid growing concerns over inflation.

The Federal Reserve is set to decide on interest rates on Wednesday, with policymakers facing pressure to address rising inflation. According to ABC News in the United States, investors put the chance of the Fed holding rates steady at about 90%, while Fox Business reports a 92% probability of rates remaining unchanged.

In contrast, Decrypt in Colombia notes that hiring is slowing, with employers adding just 29,000 jobs in September against forecasts of about 90,000, and the unemployment rate standing at 4.2%. Despite this, the publication still expects the Fed to maintain its current rate range.

The BBC in the United Kingdom reports that markets are pricing in a 92% probability of a Federal Reserve rate hike on Wednesday, while Jpost in Israel suggests that the Fed may face a communication challenge as it navigates the decision.

Despite these differences, both ABC News and the BBC agree that the odds of a quarter-point rate hike at the Fed's next meeting in December are pegged at nearly 80%, according to CME Group's FedWatch Tool.

The Federal Reserve raised interest rates by 25 basis points on Wednesday to a range of 3.75% to 4.00%, its first rate hike since 2023, as policymakers responded to renewed inflationary pressure. This move marked the first rate increase in three years.

According to the CME FedWatch Tool, as of October 28, traders estimated an approximately 84% probability of a rate hike in December, with the market expecting the Fed to hold rates steady this week.

The Federal Reserve's decision comes amid a surge in inflation, with prices increasing 3.7% in September compared to a year earlier, putting the inflation rate more than a percentage point above the Fed's target level of 2%.

The Federal Reserve's upcoming interest rate decision is expected to be influenced by the midterms, with Deutsche Bank Research suggesting that the election could factor into a potential decision to hold interest rates steady.

The Federal Reserve's decision is also being closely watched by the cryptocurrency market, with the Fed's announcement of its interest rate decision awaited by the entire market.

Higher mortgage rates have made buying a home unaffordable for 5 million more Americans since the beginning of the year, according to Oxford Economics, a consulting firm.

The Federal Reserve's decision is expected to have significant implications for the broader economy, with policymakers aiming to cool off inflation by slowing the economy and eating away at demand.

Despite the differences in reporting, both ABC News and the BBC agree that the Federal Reserve is set to issue an interest rate decision on Wednesday amid growing concerns over inflation, with the odds of a quarter-point rate hike at the Fed's next meeting in December pegged at nearly 80%.

What this adds

Background

What's confirmed

• Policymakers may lose patience as they weigh whether the current level of interest rates is high enough to ease price hikes, though markets expect the central bank to hold rates steady for now.
• "We could imagine that all else equal the Fed might prefer to stay out of the headlines for raising rates just ahead of a midterm election where affordability is the principal concern," the memo said. 24/7 coverage of breaking news and live events The Federal Reserve is set to issue an interest rate decision on Wednesday as a surge of inflation puts pressure on central bankers to raise rates days before the midterm elections.
• Investors put the chance of the Fed holding rates steady on Wednesday at about 90%, according to CME Group’s FedWatch Tool, a measure of market sentiment.
• Prices increased 3.7% in September compared to a year earlier, putting the inflation rate more than a percentage point above the Fed's target level of 2%, data showed.
• In a memo to clients, Deutsche Bank Research said the upcoming midterms could factor into a potential decision to hold interest rates steady, though in their view the election would not be a "primary consideration."
• The move marked the first rate increase in three years.
• The rate hike should help cool off inflation by slowing the economy and eating away at demand, though such a policy move typically yields results after a lag time lasting several months.
• The central bank raised interest rates a quarter of a percentage point last month in an effort to battle back price woes.
• "If the Fed hikes, investors might worry about overtightening. If the Fed holds, markets could question the Fed's inflation-fighting credibility," the memo said.

What's still developing

• TradingKey - This Thursday (October 29), the US will release the September Personal Consumption Expenditures (PCE) price index.
• The Relative Strength Index (RSI) around 40 suggests subdued momentum, hinting that any corrective uptick would likely face selling interest into nearby overhead levels.
• The Bank of Japan raised interest rates to a more than 30-year high on Friday and said it would lift them further as it looks to counter inflation fuelled by surging energy prices and a weak yen.
• The 25-basis-point hike to 1.25 percent was expected by markets following the recent tightening by the European Central Bank and the US Federal Reserve, though the decision was not unanimous as it was carried by a 7-2 majority vote.
• “Strong job growth and firmer inflation have tilted the Fed toward a September rate hike, with recent data pushing Treasury yields and mortgage rates to one-year highs,” First American Senior Economist Sam Williamson said.
• An overwhelming 85% of economists surveyed by Reuters after Friday’s inflation report — 86 of 101 — now expect the Fed to raise its target rate by a quarter percentage point, to a range of 3.75% to 4%.
• Interest rates could rise again across the world – here's why Skyler Weinand, chief investment officer at Regan Capital based in Dallas, said while inflation was in line with expectations, it was "still too hot and the Federal Reserve's hands are tied".
• Treasury yields rose on Tuesday, with the benchmark 10-year Treasury note yield hitting its highest level since July 2007 as investors brace for what may be the first in a series of rate hikes from the Federal Reserve as it tries to tamp down inflation pressures.
• That leaves Warsh facing a communication problem almost as consequential as the interest-rate decision itself.
• The resurgence of regional hostilities is keeping attention on potential inflation pressures and the broader path of US interest rates, factors that could limit downside for the Greenback.
• The RBA governor, Michele Bullock, said inflation had been too high for most of the last six years but she was confident higher rates would bring it back down.
• Oil prices pulled back but remained elevated ahead of a critical Fed decision on Wednesday, with market expectations shifting towards a prolonged US-Iran conflict.

Sources

• ABC News - Breaking News, Latest News and Videoslink
• ABC7 Bay Arealink
• Bitcoin Sistemilink
• Decryptlink
• FXStreetlink
• Fox Businesslink
• NBC Newslink
• Norada Real Estate Investmentslink
• PBSlink
• The Guardianlink
• The Motley Foollink
• TradingKeylink
• Fxstreetlink
• AFPlink
• Nationalmortgageprofessionallink
• BBClink
• Federal Reserve — video link