US Fed holds rates steady as inflation rises before midterms

Washington — The US Federal Reserve held interest rates steady at 3.75-4 per cent on Wednesday, its final policy decision before the November 3 midterm elections, even as inflation climbs further above the central bank's target. The 12-member Federal Open Market Committee voted 10-2 to stand pat, arguing it needs more data before moving again, Al Jazeera reported.

The two dissenters, Governor Lisa Cook and Cleveland Fed President Beth Hammack, wanted an immediate quarter-point hike, The Hindu reported. The hold follows September's increase — the Fed's first in three years — which drew fire from President Donald Trump, who has demanded cuts and wrote on Truth Social that "interest rates in the United States should be 1% or less."

The case for tightening is not hard to find. Consumer inflation hit 3.7 per cent in September, up from 3.4 per cent in August and nearing a three-year high, with energy prices driving much of the monthly surge. The Fed has now missed its 2 per cent target for more than five years. Its statement pointed the other way: the economy is "expanding at a strong pace", jobs are keeping up with the workforce, and "the accumulation of more information will help the Committee determine the policy stance appropriate to ensure a timely return of inflation to the Committee's 2 percent goal."

What is feeding the price rises is contested terrain. The Hindu pointed to Mr Trump's war on Iran, launched in late February, which sent energy prices soaring, alongside his tariff policies and an investment boom in artificial intelligence and the data centres behind it. Unemployment has held around 4.2 per cent over the past year. Some analysts see a muddle: Wendy Edelberg of the Brookings Institution told AFP that if a hike made sense in September, "there's just as compelling of an economic reason" to raise again now. Fed officials disagree — supervision chair Michelle Bowman said in Bangkok this month she felt no "urgency for taking further action", preferring a "wait and see" approach.

The politics are unavoidable. Inflation tops the campaign in which Democrats are trying to take both houses of Congress from Mr Trump's Republicans, with working-class households struggling despite broadly solid growth, the South China Morning Post reported. Markets had priced a better-than-90-per-cent chance of a hold, according to CME FedWatch.

The next test comes fast: Thursday's Personal Consumption Expenditures report, the Fed's preferred inflation gauge, lands within hours. Then the committee meets on December 8-9 for its final decision of the year, with current forecasts pointing to a quarter-point increase.