Federal Reserve holds the funds rate at 3.75% to 4%

The Federal Open Market Committee voted 10-2 on Wednesday to maintain the target range for the federal funds rate at 3-3/4 to 4 percent. The statement, released at 2:00 p.m. EDT on Oct. 28, says the decision supports the Federal Reserve's dual mandate and that the committee is continuing its policy of maintaining ample reserves in the banking system.

The same statement says economic activity is expanding at a strong pace. It says uncertainty remains elevated owing, in part, to geopolitical developments, while domestic spending has been resilient, productivity growth is strong, and capital investment is robust. Job gains have kept pace with the workforce, and the unemployment rate has changed little, the statement says. It says inflation remains elevated, and that the accumulation of more information will help the committee determine the policy stance appropriate to ensure a timely return of inflation to the committee's 2 percent goal. The statement says the committee will deliver price stability. Those sentences are the committee's, not a forecast added here.

Voting against the action were Lisa D. Cook and Beth M. Hammack, who preferred to raise the target range by 1/4 percentage point at this meeting, the statement says. The other members of the 10-2 vote are not named in the statement. FiscalHour's earlier report covered the meeting dates and the range the committee was carrying into the session.

The implementation note issued the same day says the Board of Governors voted unanimously to maintain the interest rate paid on reserve balances at 3.90 percent, effective Oct. 29, 2026. In a related action, the Board voted unanimously to approve the primary credit rate at the existing level of 4.0 percent. The note says the committee directed the Open Market Desk at the Federal Reserve Bank of New York, effective Oct. 29, to undertake open market operations as necessary to keep the federal funds rate in a target range of 3-3/4 to 4 percent.

That directive also sets standing overnight repurchase agreement operations at a rate of 4.0 percent, and standing overnight reverse repurchase agreement operations at an offering rate of 3.75 percent with a per-counterparty limit of $160 billion per day. It says that, when appropriate, the Desk is to increase System Open Market Account holdings through purchases of Treasury bills and, if needed, other Treasury securities with remaining maturities of 3 years or less, to maintain an ample level of reserves. Principal payments on Treasury securities are to be rolled over at auction. Principal payments on agency securities are to be reinvested into Treasury bills. The note says this operating guidance stands until the committee instructs otherwise.

A decision to leave the target range where it is, and the two dissents in favor of a higher range, are the published result of this meeting. They are not a prediction of the next vote, and they are not a judgment on what a household or a portfolio should hold.