Federal Reserve Holds Rates at 3.75%-4% as Two Officials Dissent in Favor of Immediate Hike

The Federal Reserve kept its benchmark interest rate unchanged at a target range of 3.75% to 4% at the conclusion of its October meeting, pausing after raising rates in September for the first time since 2023. Two Federal Open Market Committee members, Governor Lisa Cook and Cleveland Fed President Beth Hammack, dissented from the decision and voted for a quarter-point increase, signaling that pressure for further tightening is building inside the central bank.

The hold came against a backdrop of stubborn inflation, partly driven by elevated energy prices, and a resilient economy. Fed Chairman Kevin Warsh, who has rejected the use of forward guidance, told reporters that the economy is strong, while bond investor Jeffrey Gundlach publicly argued the Fed should already be raising rates. Market odds for a December hike rose to 85% from 78% the day before the decision.

The 10-year Treasury yield climbed back above 5%, reaching 5.04% overnight, with the 30-year yield near 5.31%. The elevated long-end rates are already pressuring fixed-income markets, with analysts noting the Fed is increasingly constrained: higher yields are tightening financial conditions even as the central bank pauses, yet persistent inflation limits the case for standing pat indefinitely. The ECB, meanwhile, was expected to hold its own benchmark steady at 2.50%, with President Christine Lagarde seen hinting at further tightening ahead.