The Federal Reserve is expected to hold interest rates steady Wednesday following last month’s increase, even as inflation remains stubbornly above the central bank’s 2% target, The New York Times reports.
Officials have signaled that the pause may be temporary, with rising prices suggesting additional rate hikes could be necessary. Fed Chair Kevin Warsh, who took office in May, has prioritized bringing inflation down more quickly and will face questions about how holding rates at 3.75% to 4% advances that goal.
The decision comes less than a week before the midterm elections, drawing heightened scrutiny because President Donald Trump selected Warsh partly on expectations that he would lower rates.
A pause could also expose divisions among policymakers, with Cleveland Fed President Beth Hammack, Dallas Fed President Lorie Logan and Minneapolis Fed President Neel Kashkari potentially dissenting in favor of another increase. They have argued that current rates are not sufficiently restraining economic activity and that new inflationary pressures, including heavy artificial intelligence industry spending that has driven up prices for computer chips and other components, warrant a more aggressive response.
Although most Fed officials previously projected only one additional rate increase this year, financial markets now anticipate roughly three quarter-point hikes through the end of 2027.
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