Markets expect the Fed to hold steady this week, and Chair Warsh must explain why not raise rates.

October 27 — According to The New York Times, the market widely expects the Federal Reserve to keep interest rates unchanged at this week's FOMC meeting (October 27–28). Fed Chair Kevin Warsh faces a communication test: he must explain why the Fed is choosing not to raise rates while inflation pressures remain high, while also demonstrating that its resolve to fight inflation has not weakened and keeping open the possibility of another rate hike within the year.

The report said the Fed already raised rates once in September, after which the market at one point priced in another hike in October; however, New York Fed President Williams, Fed Vice Chair Jefferson, and Governor Waller said from late September to early October that "we can wait a bit longer," pulling the probability of an October hike down from over 70% to less than 30%. At the same time, high oil prices and demand for materials and electricity driven by AI infrastructure pushed up September price pressures, the Nasdaq 100 index has fallen more than 7% since its record high on October 6, and the 10-year U.S. Treasury yield had previously stood above 5% for several consecutive weeks. Stephen Stanley, chief economist at Santander U.S. Capital Markets, said he expects rates to remain unchanged this week but believes another hike in December is still possible; Warsh needs to explain "why not act in October while also explaining why December remains under consideration."

Since taking office in May, Warsh has given relatively little forward guidance on the rate path. The press conference after holding rates steady in July triggered market volatility due to overly brief wording, after which an August hawkish speech and the September rate hike plus the dot plot's signal of "one more hike within the year" temporarily repaired communication. This week's decision comes ahead of the U.S. midterm elections on November 3. Trump had previously criticized the September rate hike, and analysts believe Warsh also needs to prevent the outside world from interpreting a hold as a political consideration.