AI-assisted research analysis by FutureKnowledge. Sources checked 28 October 2026. This is not investment advice.
Reviewed by FutureKnowledge: figures, dates and attributions were checked against the linked sources before publication.
The US Federal Reserve held its benchmark interest rate at 3.75% to 4% on 28 October in a 10-2 vote, with two policymakers preferring another quarter-point hike, according to the Fed’s policy statement. The pause comes six weeks after the Fed raised rates for the first time in more than three years, and less than a week before the 3 November US midterm elections.
What the Fed decided
Governor Lisa Cook and Cleveland Fed President Beth Hammack voted against the decision because they wanted to raise the target range by 0.25 percentage point, the statement said. Hammack also dissented in favour of a hike in July, Reuters reported via Business Standard. The September hike had been unanimous at 12-0, Yahoo Finance noted.
The statement’s language moved in a hawkish direction even as rates stayed put:
- Growth upgraded: economic activity is now described as expanding at a “strong” pace, up from “solid” in September (Yahoo Finance, Reuters).
- Inflation: the committee said inflation “remains elevated” and that it wants more information before setting a stance that returns inflation to 2% in a timely way.
- Jobs: job gains have kept pace with the workforce and the unemployment rate has changed little.
- Risks: uncertainty is attributed partly to “geopolitical developments”; the statement does not mention energy directly.
Reuters read the statement as hinting that further hikes may come, depending on inflation. Chair Kevin Warsh, who succeeded Jerome Powell in May according to CBS News, has said he wants to avoid detailed forward guidance. His press conference was due to begin after our sources were checked, so this article does not cover his remarks.
Why the Fed paused instead of hiking again
Inflation is hot, but mostly in energy
US consumer prices rose 3.7% in the year to September, up from 3.4% in August and above the 3.6% economists expected, Kiplinger reported. Gasoline prices jumped 9.1% in the month. Core inflation, which strips out food and energy, was 2.6%, also slightly above forecasts. The gap between the two numbers shows how much of the pressure comes from oil, which has surged with the conflict in the Middle East. Reuters noted that inflation has now been above the Fed’s 2% target for five and a half years.
That split helps explain the pause. Raising rates cannot reduce the supply of oil, but policymakers worry that higher fuel costs will spread into wages and other prices. Reuters reported that price pressures appear to be broadening, which is why two members wanted to act now.
Timing and politics
Markets had priced a hold with about 90.6% probability before the meeting, according to CME FedWatch data cited by Kiplinger. Deutsche Bank economists had expected a pause, citing tighter financial conditions and the midterms. President Donald Trump has long pushed for lower borrowing costs, CBS News noted, and has sought to remove Cook from the Fed, Reuters reported.
Fed rate decision: market reaction and the December question
Ahead of the 2 pm ET announcement, the S&P 500 was up 0.15% at 7,733.90 and the Dow up about 0.17% near 52,469, while the Nasdaq was flat, Yahoo Finance’s market blog showed. The 10-year Treasury yield was about 5.02%, and December WTI crude was up 2.9% at $102.78. These are pre-decision levels; markets often move again during the chair’s press conference.
The bigger question is December. Traders put the chance of a hike at the 8–9 December meeting at about 73% on 27 October, Kiplinger reported, while Yahoo Finance cited about 84% on 28 October. The difference reflects different days, not a conflict. The Fed’s September projections pointed to one more hike in 2026. LendingTree’s Matt Schulz told CBS News that a December move is possible but “far from guaranteed”.
The Fed is not alone. The Bank of Canada raised its rate to 2.5% the same day, Yahoo Finance reported, and markets expect the Bank of England to raise rates on 5 November after UK inflation rose to 3.5% in September.
How it affects India and businesses
A US 10-year yield near 5% makes dollar assets more attractive and usually makes it harder for emerging markets to attract foreign money. The rupee closed at 95.23 per dollar on 28 October, down 11 paise, and the Sensex fell 0.48%, with IT and oil and gas stocks leading the decline, HDFC Sky reported. Brent crude rose above $115 a barrel. A Fed that holds rates high for longer, combined with expensive oil, adds to pressure on India’s currency and import bill.
Who is more or less exposed
- More exposed: companies with unhedged dollar debt, oil importers and fuel-intensive sectors such as airlines and chemicals, and emerging markets that rely on foreign portfolio inflows.
- Mixed: Indian IT exporters earn in dollars, which helps when the rupee weakens, but they depend on US client budgets that higher rates can squeeze.
- Less exposed: savers and lenders with floating-rate assets, who benefit from higher yields while rates stay high.
For context, US rate-hike bets had already climbed sharply after hot August inflation data.
Scenarios to watch
These are conditional scenarios, not predictions.
| If… | Then it could mean… |
|---|---|
| October CPI stays near 3.7% and core inflation rises | A December hike becomes more likely; more pressure on emerging-market currencies |
| Oil prices fall sharply after Middle East tensions ease | Headline inflation cools; the Fed could hold for longer |
| Job growth slows clearly | Stronger case for a pause; lower Treasury yields |
| More policymakers join the dissenters | Signals a tighter policy path into 2027 |
What to watch next
- Warsh’s press conference remarks on whether further hikes are likely.
- The 3 November midterm elections and any political pressure on the Fed afterwards.
- October inflation and jobs data before the 8–9 December meeting.
- The rupee, foreign portfolio flows and Brent crude prices for India.
Bottom line
The Fed paused after its September hike, but the 10-2 vote, an upgraded view of growth and the “inflation remains elevated” language point to a central bank still leaning towards tighter policy. With oil above $100 and US yields near 5%, the pause offers little relief to emerging markets such as India.
Method note: We checked the decision, vote and dissents against the Federal Reserve’s 28 October statement, and compared reporting from Reuters (via Business Standard), Yahoo Finance, CBS News, Kiplinger and HDFC Sky. Market levels are pre-decision snapshots and are labelled as such.