Federal Reserve Drops Final Interest Rate Decision Before Midterms

The Federal Reserve voted Wednesday to keep interest rates steady just six days before the midterm elections. 

The central bank voted 10-2 to keep its target range for the federal funds rate at 3.75%-4.0%, in line with market expectations. The two dissenting votes were from Cleveland Fed President Beth Hammack and Fed Governor Lisa Cook, who were in favor of a rate hike.

The bank had raised rates for the first time in three years in September. Chicago Mercantile Exchange (CME) Group’s analysis had put the probability of another rate hike at 7.2%.

According to the Chicago Mercantile Exchange Group’s FedWatch, markets were betting on no rate cut. 

Typically, the Federal Reserve holds rates steady leading up to big elections, but if it does change rates, it leans in favor of a cut, according to data from the Chicago Mercantile Exchange Group. Leading up to the 2026 midterm election, the Fed decided against a change even with President Donald Trump’s repeated calls to lower rates.

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Despite persistent inflation from the war in Iran, Trump argues that interest rates should be lowered due to the United States’ “stronger credit.” 

Earlier this month, Trump said the Federal Reserve is keeping rates high because the “board would like to see the country do badly.” Trump has not criticized his new Fed Chair Kevin Warsh following the board’s recent decisions that have gone against Trump’s wishes. 

“I think Kevin is great, but Kevin is one vote out of a board with numerous people that were put on by Obama and Biden and a couple by me,” the president said. “So you have a board that would like to see the country do badly, in my opinion, because I think interest rates should come down. Michael and Brad would understand this, and Susan. We have a country that makes other countries very rich. If we didn’t make them rich, we would have a country that would be the greatest AAA credit in history.”

Treasury Secretary Scott Bessent, who discusses policy with Warsh over breakfast every week, predicted that after the conflict with Iran ends, the market will stabilize, allowing the Federal Reserve to lower rates.

“Growth here [United States] is strong. What we are seeing is headline inflation is high because of the energy shock,” Bessent said. “The core inflation actually dropped last month and is approaching the Fed’s target. So once we get on the other side of this Iran conflict energy markets are going to be well-supplied.”