Fed holds, two vote to raise: dollar borrowing stays expensive
America's central bank kept its policy rate at 3.75-4 per cent on 28 October; Lisa Cook and Beth Hammack voted for an increase, and the ten-year Treasury yield rose back above 5 per cent.
The Federal Reserve's Open Market Committee kept its policy rate at 3.75-4 per cent by ten votes to two, with two members wanting a quarter-point rise. Futures price a roughly 85 per cent chance of an increase on 9 December, according to Bloomberg data.
What happened
In September the Fed raised rates for the first time in more than three years. The pause does not end that direction. The statement says inflation remains elevated, while activity is expanding strongly and productivity and investment are robust. Recent data, including producer prices, came in hotter than expected. Kevin Warsh, the Fed's chairman, said earlier moves were beginning to work but that there were no firm conclusions, and that the midterm elections played no role. Markets reacted: the ten-year Treasury yield stood at 5.04 per cent after the decision and the 30-year at about 5.33 per cent earlier in the session. Traders expect the policy rate to reach almost 4.7 per cent by September 2027. Thirty-year mortgage rates are about 7.4 per cent, according to Realtor.com. December crude traded at about $102 a barrel, supported by fighting in the Middle East.
What follows
Assessment: if American rates keep rising, dollar money becomes dearer, both for firms with American loans and for groups increasingly financing the AI build-out with bonds. Yields above 5 per cent draw capital to America, which can support the dollar and pull European bond yields up with them. For German exporters a stronger dollar can raise revenue in euros; for importers of oil and inputs it makes purchases dearer. The ECB decides today, 29 October; its decision was not available at the time of writing. Two dissents in favour of a rise suggest a majority for one may form in December; they are not a commitment.
What changes in practice
- Firms with dollar loans
- If the Fed raises in December, floating rates on dollar financing rise further.
- Exporters and importers
- Higher American rates can support the dollar: exports earn more euros, oil and inputs cost more.
- Bond investors
- New Treasuries yield over 5 per cent; if yields rise further, older bonds lose value.
What to watch
- ECB rate decision on 29 October
- American inflation data before the Fed meeting on 9 December
- Ten-year Treasury yield above or below 5 per cent
Sources
- Federal Reserve: Federal Reserve issues FOMC statement (28.10.2026)
- Yahoo Finance: Rate decision live, interest rates held steady in split vote
- finanzen.at (Dow Jones): Begleittext zum Beschluss der US-Notenbank