In brief
In a 10‑2 decision, the Federal Reserve paused rate hikes and set the federal funds rate at 3.75‑4%. Chair Kevin Warsh warned that inflation remains too high and that the committee may raise rates again later. The pause lifted U.S. markets and pushed the Korean market higher, while dissenting members called for a 25‑basis‑point hike.
On Wednesday, October 28, the U.S. Federal Reserve announced it would keep the federal funds rate unchanged at a target range of 3.75 to 4 percent, a decision made less than a week before the 2026 midterm elections and following a recent 0.25‑percentage‑point hike in September.
The 12‑member Federal Open Market Committee (FOMC) held a 10‑2 vote, with 10 members supporting the pause and two, Cleveland Fed President Beth Hammack and Fed Governor Lisa Cook, favoring an immediate 25‑basis‑point increase. The 10‑to‑2 split reflected divisions within the committee over how aggressively to curb inflation while sustaining a resilient economy.
Fed Chair Kevin Warsh cautioned that, "Energy and related prices have moved higher again in recent weeks, and our job is to ensure that relative price changes in some sectors do not broaden out across the economy." He added, "It's our responsibility to get inflation down," during a press briefing, underscoring his view that inflation remains "too high."
In response, equity markets in the United States gained modestly on the news. The Dow Jones Industrial Average rose 97.53 points to 52,475.1, the S&P 500 added 21.38 points to 7,743.98, and the Nasdaq Composite climbed 72.04 points to 26,549.85. Eight of the 11 primary S&P 500 sectors closed in positive territory, led by technology and energy, while utilities and real estate declined slightly.
South Korean markets mirrored the global lift. The Korea Composite Stock Price Index (KOSPI) advanced 10.2 points, or 0.17 percent, to 6,022.64, buoyed by the Fed’s pause and expectations of strong third‑quarter earnings from Samsung Electronics. Samsung’s shares rose 0.52 percent, while chip giant SK hynix climbed 3.5 percent. Investors in Korea also noted the widening interest‑rate gap, which now sits at up to one percentage point.
Financial analysts and investment managers anticipate further scrutiny of economic data before the committee meets again. Global bond investment firm Pacific Investment Management Co. (PIMCO) projected that the Fed would maintain rates at the October meeting and potentially apply another quarter‑point hike in December, guiding markets to a possible year‑end adjustment.
In related news, the Fed announced a schedule change for the 2027 meeting cadence, planning to hold seven out of eight rate‑setting votes, a move that reflects a balance between policy flexibility and predictability for markets and businesses.
While most FOMC members voted to keep rates steady, the dissenting members—Hammack and Cook—suggested that tighter policy is warranted given the super‑target inflation figure of 2 percent. Their opposition highlights the ongoing debate within the central bank about the appropriate timing and pace of future rate moves.
