By Islam El-Sakka
The Federal Reserve is meeting in Washington this week and is widely expected to keep benchmark interest rates steady, despite inflation remaining above the central bank's 2% target and dominating voter concerns ahead of next Tuesday's midterm elections.
Fed officials signal patience
Vice Chair for Supervision Michelle Bowman said on Oct. 14 that inflation remains above the Fed's goal but that officials have time to wait and see how financial conditions evolve before taking further action. San Francisco Fed President Mary Daly echoed that sentiment, stating she does not feel an urgent need to decide with limited information.
Inflation data and risks
Annual inflation rose to 3.7% in September from 3.4% the previous month, reinforcing Chair Kevin Warsh's earlier warning that inflation is too high and has been for too long. The Fed last raised rates by a quarter percentage point in September after months of above-target readings. Some analysts, including those at Deutsche Bank, argue that holding rates steady in October carries risk given inflation's trajectory.
Political considerations
The Fed's reluctance to move so close to Election Day also reflects its tradition of avoiding political influence. A rate hike days before the midterms could appear politically motivated and potentially sway voters, who cite rising housing and energy costs as their top concern. Polls show voters blame President Donald Trump's Iran war and tariff policies for higher prices, with his approval on cost-of-living handling at 27%.
White House reaction
White House National Economic Council Director Kevin Hassett called the latest inflation reading disappointing and acknowledged puzzlement over why voters hold negative economic views despite higher spending.
