Fed holds US rates at 3.75% to 4% in 10-2 vote; Cook and Hammack wanted a hike

The US Federal Reserve kept its benchmark interest rate at 3.75% to 4.00% on Wednesday, 28 October, as expected, and pushed any change past the US midterm elections on 3 November, Reuters reported via Business Recorder. The decision came early on Thursday, Pakistan time.

The vote was 10 to 2. Both dissenters wanted a quarter-point rate hike, not a cut: Fed Governor Lisa Cook, whom President Donald Trump is trying to remove, dissented for the first time in her tenure, and Cleveland Fed President Beth Hammack did the same.

Why the Fed did not move

The Fed's statement said inflation "remains elevated". US inflation is running at about 3.7%, roughly one point above the Fed's 2% target, with little progress in recent months. Oil is above $100 a barrel and diesel costs remain high.

The Fed upgraded its description of the US economy to "strong" from "solid" and hinted that more hikes could follow depending on inflation, saying "the accumulation of more information will help the Committee determine the policy stance". Reuters noted that this kind of forward guidance is what Chair Kevin Warsh has said he wants to avoid.

Market reaction

The reaction was muted. US stocks gave back a little of the day's gains, and the 10-year Treasury yield rose to 5.028%. Traders still expect the Fed to start raising rates in December and keep going into 2027.

What it means in Pakistan

A Fed that holds high and leans towards hikes keeps the dollar strong and global borrowing dear. That matters for Pakistan in three ways:

• The rupee. The interbank dollar stands at about Rs 276.77 (see our USD to PKR page and the currency converter).
• Debt costs. Pakistan's dollar loans and Eurobonds are priced off US rates, so a higher path adds to what the government pays.
• Remittances and gold. A strong dollar usually weighs on gold, though war risk is pushing the other way. Track the 24 karat gold rate here.

At home, the State Bank of Pakistan's policy rate is 12%. The SBP sets its own path from Pakistan's inflation, but a hawkish Fed narrows the room to cut.

The Fed's next meeting is in December.