AAP Finance

US Fed keeps rates unchanged despite elevated inflation

By AAP Newswire

Oct 29, 2026

Federal Reserve building in Washington — The US Federal Reserve kept its key rate unchanged at about 3.9 per cent. -AP

The Federal Reserve has kept its key rate unchanged at about 3.9 per cent despite elevated inflation while providing little hint about the US central bank's next moves.

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"Inflation remains elevated," the Fed said in a statement released after its two-day policy meeting.

Holding off on an increase will allow "the accumulation of more information" that will help determine what policy the Fed should pursue "to ensure a timely return of inflation" to the central bank's 2.0 per cent inflation target, the statement said.

Fed Chairman Kevin Warsh expressed confidence US inflation can be lowered to the two per cent target without having ‌to "throw sand in the gears" and slow growth or raise unemployment.

Warsh, speaking at a press conference, said he expects a report on third-quarter gross domestic product on Thursday to show strong investment and consumer spending and an acceleration of growth from the first half of the year.

Warsh, however, said he still does not think the US economy is "too hot" or generating demand-side inflation that needs to be curbed.

"The economy is pointing in the right direction. Is the economy running too hot? Is the economy running too strong? That isn't the judgment of most of my colleagues," said Warsh, arguing, as he has before, that changes in productivity, even predating the artificial intelligence boom, may allow the US to grow faster without as much inflation.

"The ‌goal, in my view ... isn't ‌to throw sand in the gears of ⁠the economy and throw people out of work. I don't think we have to do that."

Rather, Warsh said, a higher Fed policy rate is already showing its impact in slightly tighter credit conditions that could, for example, slow business investment and which arguably contributed to recent stock market declines, another potential source of "disinflation" if it slows spending among wealthier families.

Last month the Fed raised its benchmark rate for the first time in three years, defying US President Donald Trump's demands for rate cuts, in an effort to get inflation back to its 2.0 per cent target in a "timelier" manner.

In comments to CNBC on Thursday, US Treasury Secretary Scott Bessent said the Trump administration continues to have faith that Warsh will "find the right balance" between the two per cent inflation goal and continuing economic growth.

Two Fed officials dissented from Wednesday's decision, with Fed governor Lisa Cook and Federal Reserve Bank of Cleveland president Beth Hammack voting in favour of hiking rates by a quarter point.

with Reuters