Fed Holds at 3.75%-4%:Will the Fed Raise Rates in December?

The Federal Reserve left its policy rate unchanged on Wednesday, October 28, 2026, yet two of the twelve voters wanted to raise it. That split, a rewritten line in the policy statement and a heavy batch of data the next morning all bear on one question: will the Fed raise rates in December?

The Federal Open Market Committee (FOMC), the group inside the Fed that sets interest-rate policy, held the federal funds target range at 3.75%-4.00% by a 10-2 vote. The decision follows our October 18 preview of the meeting, published before the outcome was known.

The public record on December now runs through five sources: the statement, the two dissents, Chair Kevin Warsh's press conference, the October 29 growth and inflation releases, and the Fed's own September projections.

The October 28 Decision at a Glance

The statement says the Committee "decided to maintain the target range for the federal funds rate at 3-3/4 to 4 percent." The vote was 10-2. That leaves the range where the September 16 meeting put it.

On September 16, the Committee raised the range by 0.25 percentage point to 3.75%-4.00% by a 12-0 vote. It was the first increase since July 2023.

Four terms carry the rest of the story:

• The federal funds rate is the overnight interest rate at which banks lend reserves to one another, and it anchors many other short-term rates.
• The target range is the band the Fed sets for that rate, now 3.75% to 4.00%.
• A basis point is one hundredth of a percentage point, so 25 basis points equal 0.25 percentage point.
• A dissent is a recorded vote against the Committee's decision by one of its voting members.

No new economic projections were published at the October meeting. The next Summary of Economic Projections comes with the December 8-9 meeting.

What Changed in the Statement Since September 16

Two edits stand out. The first is the description of economic activity, which moved from "expanding at a solid pace" to "expanding at a strong pace."

The second edit follows the sentence "Inflation remains elevated." In September, the next sentence read: "Today's policy action will support a timelier return to the Committee's 2 percent goal."

In October, it reads: "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."

The September sentence described what that day's increase would do. The October sentence ties the next step to incoming information rather than to a decision taken at the meeting.

Several lines are identical in both statements, from "The Committee will deliver price stability." to the sentences on jobs and productivity. Both statements also say the Committee is continuing its policy of maintaining ample reserves.

The Two Dissents: Cook and Hammack

The statement names both dissenters: "Voting against the monetary policy action were Lisa D. Cook and Beth M. Hammack, who preferred to raise the target range for the federal funds rate by 1/4 percentage point at this meeting."

Lisa D. Cook is a Federal Reserve Governor. Beth M. Hammack is President of the Federal Reserve Bank of Cleveland. Both preferred a range of 4.00%-4.25% at this meeting.

Both dissents pointed in the same direction. Neither dissenter favored a lower range, and the September vote that produced the current range had been unanimous.

The statement records what the two preferred. It does not set out their reasoning.

What Warsh Said at the Press Conference

Chair Kevin Warsh took questions after the statement was released. The quotations below come from the transcript the Fed has posted as a preliminary version.

No forward guidance and no prejudged meetings

Forward guidance is a central bank's public signal about the path it intends to take with interest rates. Warsh said he does not use it in ordinary times.

"

I don't believe in forward guidance absent exigent circumstances, absent a crisis.

— Kevin Warsh (FOMC press conference, October 28, 2026 (preliminary transcript))

He added: "I also don't believe in prejudging meetings. A lot of things can happen."

Warsh described the weeks before the next meeting as "information rich." He said he expects that information to help the Committee determine where policy should be.

Inflation and the 2 percent target

"But inflation is too high," Warsh said. He noted that inflation has run above the 2% objective for close to six years, and that energy prices moved higher again in recent weeks.

He was explicit about the target itself: "There's no soft inflation target. There's no implicit inflation target. There's a target of price stability and it's 2 percent as measured by PCE."

On timing, he said "quashing inflation is not about some fixed individual date on a calendar. Same way it's not about some isolated data point."

He also acknowledged the gap that remains: "But if the crux of your question is, you haven't delivered yet, you haven't achieved price stability, you're right about that. But we're working on it."

Financial conditions and the September increase

Financial conditions describe how easy or costly it is for households and businesses to borrow and raise money, through interest rates, credit spreads, stock prices and the dollar.

"

And while overall financial conditions are tighter, I'm unwilling and unable to call them tight.

— Kevin Warsh (FOMC press conference, October 28, 2026 (preliminary transcript))

On the September increase, he said "broadly I would say the effects on financial markets, on financial market conditions broadly were consistent with my expectations."

Warsh described the overwhelming judgment in the room as a view that policy is starting to work some. He added that there are no firm conclusions yet.

A new meeting schedule for 2027 and 2028

Warsh also announced a change in how the Committee's meetings will be used: "We believe eight meetings per year is the right number for the FOMC. But in 2027, one meeting will focus exclusively on broad monetary policy strategy, with neither a vote on the federal funds rate nor a policy statement anticipated."

For the year after, he said: "And I expect that in 2028, we'll have two meetings dedicated to discussions of strategy, and six for setting policy."

The Data That Came the Next Morning: Q3 GDP and September PCE

On Thursday, October 29, the Bureau of Economic Analysis (BEA) published its advance estimate of third-quarter gross domestic product (GDP) and its September report on personal income and outlays. Four definitions help here:

• PCE inflation is the change in the personal consumption expenditures price index, the measure of consumer prices the Fed uses for its 2% goal.
• Core inflation excludes food and energy prices, which tend to swing more than other prices.
• An annualized rate shows what a change over one quarter would amount to if it continued at the same pace for a full year.
• Real disposable income is household income after taxes, adjusted for inflation.

In September, the PCE price index rose 0.5% from August and 3.6% from a year earlier, up from 3.4% in August. Core PCE rose 0.3% on the month and 3.1% from a year earlier, up from 3.0%.

Household budgets were squeezed in the month. Real disposable personal income fell 0.3% in September after no change in August, the personal saving rate was 3.8%, and real consumer spending was essentially flat, rising less than 0.1%.

The quarter as a whole looked different. Real GDP grew at a 3.4% annual rate in the third quarter, up from 2.2% in the second, and real final sales to private domestic purchasers grew at a 4.9% rate after 4.6%.

Quarterly price growth also slowed. The PCE price index rose at a 2.1% annualized rate in the third quarter after 5.0% in the second, and core PCE rose at a 2.5% rate after 3.3%.

Why quarterly PCE inflation can sit below the 12-month rate

The 2.1% and the 3.6% measure different windows. The 12-month rate compares September with a year earlier, so it still includes the large price rises of the second quarter. The quarterly rate measures only July to September, expressed at an annual pace.

Neither figure cancels the other. One shows where the price level stands against a year ago; the other shows the pace over the most recent three months.

The jobs picture: payrolls, unemployment and claims

Payrolls measure the monthly change in the number of jobs on employers' books. Initial jobless claims count new applications for unemployment benefits in a given week.

Employers added 29,000 jobs in September after 162,000 in August, and the unemployment rate rose to 4.2% from 4.1%. Initial claims were 194,000 in the week ended October 24.

What the Fed's Own September Projections Show

The dot plot is the chart in the Summary of Economic Projections where each participant marks where they think the federal funds rate should be at the end of each year. Each dot is one person's judgment, not a Committee plan or a promise.

In September, the median participant placed the rate's midpoint at 4.1% at the end of 2026, against a current midpoint of 3.875%. Of 18 participants, 2 put it at the current midpoint, 12 between 4.13% and 4.37%, and 4 between 4.38% and 4.62%.

That means 16 of 18 projected at least one more 0.25-point increase in 2026. The median path then stayed at 4.1% for 2027 and eased to 3.9% in 2028, 3.6% in 2029 and 3.2% in the longer run.

The same projections put median PCE inflation at 3.7% for 2026, core PCE inflation at 3.4% and real GDP growth at 2.3%.

Warsh said he does not submit a dot, while the other 18 participants do. These projections predate the October hold and the October 29 data; a new set arrives with the December meeting.

How Treasury Yields and Futures Moved

The 2-year Treasury yield

The 2-year Treasury yield is the return on two-year U.S. government debt, and as a general rule it is the market rate most sensitive to expected Fed policy.

Between Tuesday, October 27, and Friday, October 30, the 2-year yield fell from 4.70% to 4.56%, a decline of 14 basis points. Over the same days, the 10-year yield fell 5 basis points, from 4.99% to 4.94%.

Over a longer window, the 10-year yield on October 30 stood 35 basis points below its September 30 level of 5.29%. The 3-month yield moved from 4.22% on October 27 to 4.16% on October 30.

What fed funds futures are

Fed funds futures are exchange-traded contracts whose prices reflect where traders expect the average federal funds rate to settle in a given month. CME FedWatch converts those prices into implied probabilities for each Fed meeting.

CNBC reported on October 29, 2026, that CME FedWatch showed markets pricing more than a 77% chance of a quarter-point increase in December. That figure is a market price, not a forecast, and such readings change through the day and differ between outlets.

Before the October meeting, reported CME FedWatch odds of an October increase ranged from 28% to 50% on October 14 and 15. The Committee held.

The Road to December 8-9

Two jobs reports, one consumer price index and one PCE release land before the Committee meets again. The consumer price index (CPI), a second gauge of consumer prices published by the Bureau of Labor Statistics, is due in mid-November.

The November 25 release also brings the second estimate of third-quarter GDP, which can revise the 3.4% advance figure. The December meeting itself comes with new projections, so the dot plot will reflect everything published since September.

The November 3 midterm elections also fall in this window. On politics, Warsh said: "So, politics played no role in the decision."

What a December Increase or a December Hold Would Mean

If the Committee raised the range by 0.25 percentage point in December, the federal funds target range would become 4.00%-4.25%. If it made no change, the range would stay at 3.75%-4.00%.

Variable-rate borrowing, savings and Treasury bills

The federal funds rate tends to pass through fastest to rates that reset often. Credit card rates are usually variable and often move with the prime rate, which banks tend to adjust when the Fed changes its range.

On the saving side, yields on savings accounts and short-term Treasury bills can move with the federal funds rate. Banks set their own deposit rates, though, so the size and timing of any change varies.

A fuller walk-through of how interest rates pass through to borrowing and savings covers credit cards, savings accounts and mortgages one by one.

Why fixed mortgage rates follow longer-term yields

Fixed mortgage rates tend to track longer-term Treasury yields, such as the 10-year, more closely than the federal funds rate. A change in the Fed's range can therefore coincide with little change in mortgage rates, or with moves in the other direction.

The period since September shows how the two can separate. The 10-year yield fell 35 basis points from September 30 to October 30, while the target range did not change.

These are general relationships, not forecasts. How any rate responds after December will depend on lenders, market conditions and data that has not yet been published.

Two Ways to Read the October Hold

One way to read the decision is as a pause on the way to another increase. The record that fits this reading:

• Two voters, Cook and Hammack, preferred to raise the range at the October meeting.
• The statement still says "Inflation remains elevated."
• September core PCE inflation was 3.1% from a year earlier, and headline PCE inflation was 3.6%.
• The economy grew at a 3.4% annual rate in the third quarter.
• In September, 16 of 18 participants projected at least one more increase in 2026.
• Futures pricing reported after the meeting pointed the same way.

Another reading is that the Fed may not need to move in December. The record that fits this reading:

• Warsh said ending inflation is "not about some fixed individual date on a calendar."
• He said financial conditions have tightened since September, and that the effects of the September increase were consistent with his expectations.
• The 2-year Treasury yield fell from 4.70% on October 27 to 4.56% on October 30.
• PCE prices rose at a 2.1% annual rate in the third quarter as a whole, with core PCE prices at 2.5%.
• Real disposable income fell 0.3% in September.

The releases due before December 8-9 will add to that record. Warsh's own words frame the wait: "I also don't believe in prejudging meetings. A lot of things can happen."

Frequently Asked Questions

Did the Fed raise rates in October 2026?

No. On October 28, 2026, the FOMC held the federal funds target range at 3.75%-4.00% by a 10-2 vote. The previous change was a 0.25-point increase on September 16.

Who dissented at the October 2026 Fed meeting?

Governor Lisa D. Cook and Cleveland Fed President Beth M. Hammack dissented. Both preferred to raise the target range by 0.25 percentage point at the October meeting.

When is the next Fed meeting?

The next FOMC meeting is December 8-9, 2026. It comes with a new Summary of Economic Projections, the first since September 16.

Will the Fed raise rates in December?

That decision has not been made, and Warsh said he does not believe in prejudging meetings. The October jobs report, October CPI, October PCE inflation and the November jobs report all arrive before the meeting.

What would a December increase mean for the target range?

A 0.25-point increase would move the federal funds target range to 4.00%-4.25%. With no change, it would stay at 3.75%-4.00%.

What is the difference between PCE and core PCE inflation?

PCE inflation covers all prices in the personal consumption expenditures price index. Core PCE inflation leaves out food and energy. In September they were 3.6% and 3.1% from a year earlier.

Does the Fed's dot plot mean rates will rise?

Not necessarily. The dots are individual projections, not a plan or a promise. In September, 16 of 18 participants projected at least one more increase in 2026, but those views predate the October data and can change at the December meeting.