The Federal Reserve has decided to keep its benchmark interest rate unchanged ahead of the midterm elections on November 3. This decision comes as rising oil prices and consumer inflation, exacerbated by the war in Iran, put pressure on consumers' ability to repay household loans.
According to reports from CNBC and other outlets, the Federal Open Market Committee (FOMC) announced on October 28 that it would maintain the current rate at 3.75% to 4.00%. Prior to this decision, market analysts had anticipated a rate freeze, with CNBC citing the CME Group's FedWatch tool indicating a less than 10% chance of a rate hike this time. As a result of this decision, South Korea's rate remains 1.00 percentage points lower than that of the U.S.
There are indications that FOMC members had differing opinions regarding a potential rate increase. Yahoo Finance reported on October 28 that minutes from the September FOMC meeting revealed that members considered one more rate hike appropriate by the end of the year. However, there was disagreement among officials and economists about whether to implement this at the end of October or wait for more data until December. Lindsey Piegza, chief economist at Stifel, told Yahoo Finance, "Most officials seem to support at least a minimal policy tightening by year-end, but they appear to be taking a very patient and lukewarm approach to further rate increases."
Critics have labeled the decision to hold rates steady as politically motivated. Narayana Kocherlakota, former president of the Minneapolis Federal Reserve Bank, stated, "The lack of progress in this meeting signals that they (the FOMC) are influenced by the political environment, which is not a good sign. We are in a strong situation where rates should be raised at this point." CNN previously noted that President Donald Trump has repeatedly called for rate cuts.
The significant investments by artificial intelligence companies are contributing to ongoing economic growth, and the rise in energy prices is also a concern for Fed Chair Kevin Warsh. Reuters highlighted that the Consumer Price Index (CPI) in the U.S. rose by 0.6% in September compared to the previous month and increased by 3.7 percentage points year-over-year. The unemployment rate remains stable at 4.2%. Warsh previously remarked in a discussion with the International Monetary Fund (IMF) that while the effects on employment over the next 12 to 18 months are uncertain, if AI investment continues to enhance economic and national productivity, it would be very beneficial.
Market attention is now focused on the next FOMC meeting scheduled for December 8-9, which will be the last rate decision meeting of the year.
* This article has been translated by AI.
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