The Federal Reserve held interest rates steady this week after raising them in September, as policymakers continue to weigh persistent inflation against a still-strong economy.
The Federal Open Market Committee voted 10-2 to maintain the federal funds rate at a target range of 3.75% to 4%. The decision follows the Fed’s September quarter-point increase, its first rate hike since 2023.
The Fed said economic activity continues to expand at a strong pace, supported by resilient domestic spending, strong productivity growth, and robust capital investment. Job gains have kept pace with workforce growth, while the unemployment rate has changed little.
Inflation remains above the Fed’s 2% target. The Fed’s preferred inflation measure, the personal consumption expenditures price index, was up 3.4% in August compared with a year earlier.
The split vote also showed continued inflation concerns. Federal Reserve Governor Lisa Cook and Cleveland Fed President Beth Hammack voted for another quarter-point increase rather than holding rates steady.
For now, the Fed is keeping borrowing costs elevated while it waits for more economic data. The next Federal Open Market Committee meeting is scheduled for December 8-9.
Higher interest rates continue to affect borrowing throughout the economy. For counties, that can mean higher financing costs for school construction, roads, public safety facilities, water and sewer projects, and other capital investments. Elevated rates can also slow housing activity and private development, affecting local economies and revenues.
The October decision leaves the Fed in a holding pattern after September’s increase, but policymakers have left the door open to additional action if inflation remains elevated.
Stay tuned to Conduit Street for more information.
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