US Fed stands still as focus turns to future rate path

The Fed’s October pause leaves a December hike as the central case, although the decision was more balanced than markets had expected.

• The Fed kept its target range at 3.75–4%, with Hammack and Cook dissenting in favour of a hike; Warsh described the decision as a “heck of a family fight”.
• Officials said they needed more information, while the statement described economic activity as “strong” rather than “solid”; inflation remains above target and has done so for close to six years.
• Markets had priced less than a 10% probability of an October hike but about an 85% probability of a December hike before the meeting; expectations subsequently fell from roughly three further hikes to closer to 2.5.
• Warsh said financial conditions had tightened since September but were not yet “tight”, and noted that capital expenditure growth was broadening beyond technology even as higher rates were affecting the tech sector.
• The Fed will repurpose one meeting next year and two meetings in 2028, eventually reducing monetary-policy decisions from eight to six annually; upcoming signals will include post-blackout Fed speeches, mid-term elections, economic data and the Middle East conflict.

Takeaway: The pause was not dovish enough to invalidate a December hike, but the outlook remains data-dependent and sovereign bond-market volatility is likely to stay elevated through the final two months of 2026.