The US Federal Reserve is expected to leave interest rates unchanged on Wednesday at its FOMC meeting in October 2026, even as war-driven oil and gas prices push inflation higher, BNN Bloomberg reported.
A pause would not settle the question. Wall Street investors widely expect the Fed to raise its key rate at its next meeting in December. That would add to borrowing costs that have already climbed for American households with mortgages, auto loans and credit card balances.
The decision also comes less than a week before the midterm elections, in which the cost of living and affordability have been dominant issues, according to BNN Bloomberg.
FOMC meeting: what to expect from Wednesday's decision
The Fed's rate-setting committee, known as the FOMC, sets the central bank's short-term interest rate. It uses that rate to pursue its 2 percent inflation target. Higher borrowing costs can, over time, cool spending and slow price increases.
Last month the Fed raised its key rate for the first time in three years, from about 3.6 percent to 3.9 percent. Many investors and economists saw the move as a first step in a renewed effort to bring inflation down, BNN Bloomberg reported.
Chairman Kevin Warsh, whom President Donald Trump appointed, will hold a news conference after the decision is announced. If the Fed holds rates steady, he is likely to face questions about why it hiked in September but not in October.
According to BNN Bloomberg, Warsh is likely to repeat the Fed's wish for a "timelier" return of inflation to 2 percent. Some observers may read that as a signal of a December increase.
Warsh will likely try to keep the session short. Last month's news conference lasted about 30 minutes. His predecessor, Jerome Powell, often spoke for about 45 minutes, the outlet reported.
Warsh is also under political pressure. Trump criticized the Fed for last month's hike, though he largely blamed the rate-setting committee rather than Warsh.
How a December hike could affect mortgage rates and other loans
Over time, Fed rate hikes can make mortgages, auto loans and credit card borrowing more expensive. That adds to Americans' sense that homes and cars are getting pricier, BNN Bloomberg reported.
Some borrowing costs rose even before the Fed acted in September, pushed up by market forces. The average 30-year mortgage rate reached a three-year high of 7.4 percent earlier this month before slipping slightly.
Higher mortgage rates have put homeownership out of reach for 5 million more Americans since the beginning of the year, according to the consulting firm Oxford Economics.
Consumers have generally soured on the economy as gas, groceries and clothing have become more expensive.
Why US inflation is rising in 2026
Inflation has accelerated over the past couple of months as the Iran war drove up oil and gas prices. These are the key figures, according to BNN Bloomberg:
- Consumer prices rose 3.7 percent in September from a year earlier, up from 2.4 percent in February, just before the Iran war.
- The consumer price index rose 0.3 percent month-on-month in both August and September. Sustained over a full year, that pace would put inflation well above the Fed's 2 percent target.
- The personal consumption expenditures price index, the inflation measure the Fed follows more closely, is due Thursday. It is forecast to show a 3.6 percent rise in September from a year earlier, up from 3.4 percent in August.
- Core PCE prices, which exclude food and energy, are forecast to have risen 3.1 percent, up from 3 percent the previous month.
Some of the forces behind rising prices may not respond easily to higher interest rates, BNN Bloomberg reported. These include higher energy prices and the rapid buildout of artificial intelligence infrastructure.
Aditya Bhave, head of US economics at Bank of America, said economists and the Fed have become too complacent about inflation running above target. He said higher oil and gas prices will likely keep inflation elevated for several more months.
Bhave said rising diesel costs will raise shipping prices for nearly every type of good, which could spread inflation more broadly through the economy.
"Unless the Fed takes this problem more seriously and stops essentially making excuses about inflation, I think we're not going to get back to 2 per cent until the next recession," Bhave said.
Bank of Canada, ECB and Bank of Japan also meet this week
The Fed's meeting is part of a busy week for central banks. The Bank of Canada also meets Wednesday and is forecast to raise its key rate by a quarter point, to 2.5 percent, BNN Bloomberg reported.
The European Central Bank and the Bank of Japan are both scheduled to meet Thursday, the same day the PCE inflation figures are released. Those figures could confirm or change the inflation picture the Fed weighs ahead of its December meeting.
This is a preview written before the Fed's announcement. The story will be updated with the rate decision and Warsh's remarks.