Fed holds interest rates steady despite persistent US inflation

The US Federal Reserve held interest rates steady on Wednesday even as inflation remains high, sending a warning that more hikes could be on the table until a fresh batch of economic reports have been studied.

The US Federal Reserve said it would leave its benchmark interest rate unchanged at between 3.75% and 4%, voting 10-2 with Governors Lisa Cook and Beth Hammack dissenting in favour of a quarter-percentage point hike, the Federal Reserve said.

Central bank governors said their policy decision also would be assisted by more insight into the path for inflation and growth over the next few years. “Inflation remains too high,” they said in the policy statement.

The Federal Reserve’s Kevin Warsh made no mention of politics in the decision, which was taken less than a week before US midterm elections.

Inflation accelerated to 3.7% in the year through September and remains well above the Fed’s target. Higher energy prices and persistent demand from consumers have posed challenges to slowing prices, Reuters reported.

The hike comes after a rate rise in September and puts borrowing costs higher for people and firms. Higher interest rates can drive up the cost of mortgages, credit cards and loans to businesses – but also put the brakes on spending and prices.

Now, investors are betting on the Fed’s December meeting as the time when it will signal if policymakers intend to raise rates yet again.

The central bank said it would continue to monitor the flow of incoming data before deciding the next policy step.