FX.co ★ Fed to Keep Rates Steady

The Federal Reserve is widely expected to leave the federal funds rate unchanged at 3.75%–4.00% at its October 2026 meeting, after a 25 bps increase in September—the first rate hike since 2023. Investors will focus closely on policymakers’ guidance, particularly from Chair Kevin Warsh, for signals on the future policy path, as markets are currently pricing in another 25 bps hike in December.

Recent inflation data have heightened worries about persistent price pressures. The US annual inflation rate rose to 3.7% in September, up from 3.4% in each of the previous two months and above market expectations of 3.6%, largely due to higher energy costs. At the same time, producer prices jumped 6.3% year over year—the fastest pace since December 2022 and well above the consensus forecast of 5.3%. With oil prices elevated, inflation is likely to remain under upward pressure. Meanwhile, the labor market appears to have settled into a “low-fire, low-hire” mode.