What to Expect from the October 2026 Fed Meeting

Key Takeaways

• Even though inflation remains above target, analysts expect the Fed to hold interest rates steady when it meets this week.
• Public commentary from some Fed officials suggests the committee is comfortable pausing rate increases until more inflation data is released.
• Markets expect a 0.25% hike in December.

Wall Street widely expects the Federal Reserve to leave interest rates unchanged when it meets on Wednesday, but a December hike is still in the cards.

With inflation running above the Fed’s 2% target but the labor market holding relatively steady, analysts say central bankers have room to pause while maintaining Chair Kevin Warsh’s commitment to bringing inflation under control quickly.

“The data doesn’t necessarily warrant [a hiking cycle] in full force,” says Eric Freedman, chief investment officer at Northern Trust Wealth Management. The labor market isn’t flashing warning signs that suggest the Fed needs to tighten rates for a prolonged period. The Fed rate-setting committee likely won’t want to telegraph a hiking-cycle message to markets, either.

On the other hand, Chris Hodge, chief US economist at Natixis, explained in a Monday research note that pausing would allow more time to determine whether recent high inflation readings were part of a larger trend.

The federal-funds rate target range is now 3.75%-4.00%. October’s meeting follows a hike in September—the Fed’s first in three years.

Changing Expectations

Market odds of a Fed pause in October have swung dramatically from just 36% a month ago to 90% today, according to CME FedWatch. That reflects the changing inflation landscape and the market’s constant analysis of signals from Federal Open Market Committee members.

“There’s still a lot to learn about how this Fed will operate in the future, and so there’s a lot for the market to wrap its arms around,” says Rebecca Venter, senior fixed income client portfolio manager at Vanguard.

Venter attributes much of that changing sentiment to public comments from Fed officials over the last few weeks. Fed Chair Warsh made headlines this summer with his minimalist approach to discussing rate decisions, but other members of the FOMC have been more forthcoming in their assessments, which lately have been about staying flexible.

Lessons from ‘Fedspeak’

Though Warsh has repeatedly emphasized his commitment to reduce so-called forward guidance, analysts say remarks from other committee members over the past few weeks—what’s known on Wall Street as “Fedspeak”—suggest a pause may be imminent.

“We’ve heard from several members of the Fed that there’s definitely still a focus on inflation. But there’s [also] been communication of an ability to be flexible,” Vanguard’s Venter explains. That’s giving the market confidence that the FOMC doesn’t plan to raise interest rates at every meeting for the next few months.

Multiple Fed officials—including NY Fed President John Williams, Vice Chair Philip Jefferson, Governor Christopher Waller, and Governor Michelle Bowman—have signaled that interest rate hikes do not need to be consecutive, and that they don’t feel that another hike is needed immediately. “I don’t feel any urgency for taking further action at this point,” Bowman said earlier this month.

In other words, “The supporting cast has downplayed the probabilities of a rate hike at this meeting,” says Freedman of Northern Trust.

Why the flexibility? “Our best guess is that many were caught off guard by the market’s very hawkish interpretation of the September FOMC meeting, and they aren’t yet convinced that the Fed needs to embark on a full-throated tightening cycle,” wrote JPMorgan chief US economist Michael Feroli on Friday.

Bank of America analysts believe a rate hike is coming in October, but they acknowledge the tricky dynamics at play for the Fed. “There is no way to square [Fed officials’] comments with Warsh’s stated objection to forward guidance. Warsh can’t muzzle his colleagues, but delivering a hike in Oct would firmly signal to markets that the Fed has exited the business of coordinated messaging,” they wrote last week. “By contrast, not hiking would vindicate markets’ response to Williams and Jefferson. If Warsh is silent while others guide markets on the policy path, he loses the bully pulpit.”

Analysts also point out that the Fed rarely adjusts interest rates ahead of elections.

What’s Ahead for Interest Rates

Beyond October, markets are pricing in a 75% chance of a single 0.25% hike by the December meeting.

Vanguard’s Venter is also expecting a pause in October, followed by a hike in December. “The question is, will this be simply a removal of the insurance cuts that the Fed delivered last year, which was three cuts?” she asks. The alternative would be a much longer hiking cycle.

Morningstar chief US economist Preston Caldwell is expecting a scenario more like the former—the removal of insurance cuts. Beyond 2026, he forecasts that the Fed will cut rates twice in the second half of 2027 as inflation falls and growth weakens.