The Federal Reserve left interest rates unchanged Oct. 28, pausing after its September quarter-point increase as policymakers wait for more evidence on whether inflation is moving back toward the central bank’s 2% target.

The Federal Open Market Committee voted 10-2 to maintain the federal funds rate target range at 3.75%-4%. The Fed raised that range by 25 basis points at its Sept. 15-16 meeting — its first rate increase in three years — after holding rates steady through much of 2026.

In its latest statement, the Fed upgraded its assessment of the economy, saying economic activity is expanding at a “strong pace,” compared with the “solid pace” language used in September. It added that domestic spending has remained resilient, productivity growth is strong and capital investment is robust. Job gains have kept pace with workforce growth, while the unemployment rate has changed little.

Inflation, however, remains elevated, the Fed acknowledged. Per usual, policymakers indicated that accumulating additional economic data will help determine the appropriate policy stance for returning inflation to the Fed’s 2% goal.

The decision drew two dissents. Fed Governor Lisa Cook and Cleveland Fed President Beth Hammack each favored another 25-basis-point increase, which would have lifted the target range to 4%-4.25%. Hammack also dissented in favor of a rate hike at the Fed’s July meeting.

The October pause had been widely expected. Ahead of the meeting, 94 of 100 economists surveyed by Reuters forecast that the Fed would hold rates steady, although all 100 expected another increase in December.

The FOMC’s final scheduled meeting of 2026 is Dec. 8-9 and will include an updated Summary of Economic Projections.

MDM Analysis

For distributors, the pause prevents another immediate increase in financing costs, but it offers little indication that meaningful rate relief is coming soon. More encouraging is the Fed’s stronger assessment of economic activity and continued robust capital investment — supportive signals for industrial demand. Persistent inflation and two votes for another hike, however, reinforce the need to remain disciplined around borrowing, inventory and capital spending. Another rate increase would further raise financing costs for distributors and their customers heading into 2027.