What’s the Fed’s next move?

The Federal Reserve is likely to raise rates by 25 basis points in December, then avoid a sustained hiking cycle as it assesses inflation and institutional reforms.

• The FOMC kept the federal funds rate at 3.75–4.0% in October, despite September CPI inflation reaching 3.7% year over year from 3.4% in August.
• Two governors, Lisa Cook and Beth Hammack, dissented in favor of a 25-basis-point increase, while the September rate decision had been unanimous.
• J.P. Morgan economist Michael Feroli sees business surveys, energy-cost pass-through and import prices keeping core inflation firm in the near term, supporting a December hike.
• One of the Fed’s eight 2027 meetings will focus on broad monetary policy strategy rather than rates, and two meetings will have that role in 2028, potentially creating 12- or 13-week gaps between decisions.
• Five task forces are reviewing communications, the balance sheet, data, productivity and jobs, and inflation frameworks, with findings expected by year-end 2026.
• The review could examine the dot plot, alternative data, a smaller balance sheet, AI-driven productivity and broader inflation models, although J.P. Morgan expects policy changes to be gradual and dependent on wider FOMC support.

Takeaway: The baseline is one December hike followed by a pause, while the Fed’s task forces may gradually reshape its policy framework without changing the near-term interest-rate outlook.