Fed expected to hold rates before US midterms

The US Federal Reserve is expected to leave interest rates unchanged at its two-day policy meeting next week, analysts say, with its decision due Wednesday at 2:00 pm local time, or 18:00 GMT, days before the November 3 midterm elections.

The Federal Open Market Committee raised the target range for the federal funds rate to 3.75 percent to 4.0 percent in September, its first increase in three years. Inflation remains above the Fed's long-term 2 percent target. The Fed's preferred Personal Consumption Expenditures price index was reported at 3.9 percent in May after falling to about 2.2 percent by late 2024 from a 2022 peak of 7.2 percent.

Loretta Mester, a former head of the Cleveland Fed, told AFP that the election timing would not drive the Fed's decision. She said policy would be “based on the economics” and argued that stable labor-market data and inflation above target supported further rate increases. Mester said policymakers may nevertheless wait until the following meeting in early December.

Wendy Edelberg, a senior fellow at the Brookings Institution, told AFP that central bankers would prefer not to be drawn into political debate immediately before the vote. She said there would not be major economic implications if policymakers raised rates in December rather than October.

President Donald Trump has criticised high interest rates in the past and has so far not targeted Fed Chair Kevin Warsh over the issue as he did Warsh's predecessor, Jerome Powell. Trump has also sought to remove Fed Governor Lisa Cook over mortgage-fraud allegations, which Cook denies; the effort is continuing despite a Supreme Court decision nullifying an earlier attempt to fire her.