Fed Expected to Hold Rates in October, December Hike Likely
Key Takeaway: Markets price an 83% chance the Fed stands pat on October 28, with 94 of 100 Reuters-polled economists expecting a hold in October and all 100 expecting a hike by December as hot September inflation keeps pressure on.
The Federal Reserve is widely expected to leave interest rates unchanged at its October 27-28 meeting, holding the benchmark at 3.75% to 4.00%, while economists and markets price in a hike at the December gathering, according to [Norada Real Estate Investments](https://www.noradarealestate.com/blog/interest-rate-predictions-october-2026/).
October meeting: a hold is the strong favourite
The Federal Open Market Committee meets on October 27-28, with the decision announced at 2 p.m. Eastern on October 28, and markets and most economists expect the central bank to stand pat. CME FedWatch data put the odds of a pause at about 83% on October 20, with only a 17% chance of a quarter-point hike and essentially no chance of a cut, according to CME FedWatch data as reported by [Norada Real Estate Investments](https://www.noradarealestate.com/blog/interest-rate-predictions-october-2026/).
The economist consensus is even stronger: 94 of 100 economists in a [Reuters](https://www.reuters.com/business/fed-skip-october-raise-rates-again-december-nearly-all-economists-say-2026-10-20/) poll conducted October 16-20 expect the Fed to hold the federal funds rate in the 3.75% to 4.00% range this month. Fed Chair Kevin Warsh offered no hints at the IMF and World Bank gathering in Bangkok on October 16, telling reporters: “I don’t prejudge meetings.”
[CNBC](https://www.cnbc.com/2026/10/16/kevin-warsh-fed-october-rate-hike-interest-rates-markets.html) notes that Warsh has repeatedly rejected the convention of signalling decisions in advance, and that remarks from Vice Chairman Philip Jefferson and New York Fed President John Williams pointed to little urgency to raise rates, pushing markets toward the hold camp through the week. Hold odds rose from 66% on October 14, per [Forbes](https://www.forbes.com/sites/digital-assets/2026/10/14/fed-66-likely-to-hold-rates-steady-following-high-inflation-data/), to about 83% by October 20 as officials spoke.
December: a hike looks likely, the size is debated
A December move is the market’s base case: CME FedWatch implies about a 94% chance of at least one more hike at the December 8-9 meeting, taking the range to 4.00%-4.25%, and every one of the 100 economists in Reuters’ poll expects an increase then.
The size of that move is disputed. Norada leans toward a single quarter-point hike, and nearly 60% of Reuters forecasters see the policy rate peaking at 4.00%-4.25%. But 38 of 92 respondents predict at least two further increases, and Mizuho senior US economist Alex Pelle argues the risk is greater of a 50 basis point December move than of no hike at all. Morgan Stanley’s Michael Gapen adds: “The risks are in the direction of a Fed that ultimately needs to hike rates more than we expect.”
The September meeting minutes, released October 7, show most officials think one more increase “would likely be appropriate by year end,” describing the current stance as “not restrictive or only mildly restrictive.” The median Fed official now expects the funds rate to end 2026 at 4.1%, up from 3.8% in the June projections.
Inflation data keeps the pressure on
The tightening case rests on September’s hot inflation print: consumer prices climbed 0.6% on the month and 3.7% on the year, accelerating from 3.4% in August and sitting far above the Fed’s 2% target, Bureau of Labor Statistics data show.
Fuel drove the overshoot. Petrol prices surged 9.1% in September and stand 34.2% higher than a year ago, lifting overall energy costs 20.4% over 12 months. Underlying pressures are building too: core inflation reached 2.6% over the year, up from 2.4% in August. The producer price index gained 6.3% annually, implying the next core PCE reading will come in at 3.1% year over year, CNBC reports.
Reuters notes inflation has run above the Fed’s 2% target for nearly six years, with its poll medians not seeing PCE return to target until at least 2028. The October 27-28 meeting falls days before the November 3 midterm elections, and Reuters reports the rising cost of living is a key political vulnerability, with oil prices holding above $100.
What it means for mortgages
For homebuyers, the damage is already priced in. Freddie Mac’s weekly survey showed the average 30-year fixed mortgage at 7.40% for the week of October 15, with the 15-year at 6.71%. A year ago the 30-year averaged 6.27%.
The monthly cost is stark: about $2,423 in principal and interest on a $350,000 loan at 7.40%, roughly $264 more each month than at last year’s 6.27%. Norada sees 30-year rates holding around 7% to 7.5% through year end, with no cuts in 2026. Bond markets agree the pressure persists: the 10-year Treasury yield ended October 19 at 5.15%, while the 3-month bill yielded 4.27%, above the 3.7% inflation rate.
Fresh data arrives November 10, when the next inflation report lands after the October meeting and before the December decision. Until then, Warsh’s line holds: no prejudging, and the 2% goal remains what he calls a firm, fixed target.
Key Story Metrics
| Figure | Reported Status |
|---|---|
| Federal funds target range | 3.75% to 4.00% (FOMC, September 15-16) |
| Odds of October hold | ~83% (CME FedWatch, October 20) |
| Odds of October hike | ~17% (CME FedWatch, October 20) |
| Chance of hike by December | ~94% (CME FedWatch, October 20) |
| September CPI, annual | 3.7% (Bureau of Labor Statistics) |
| September gasoline, monthly | 9.1% (Bureau of Labor Statistics) |
| 30-year fixed mortgage | 7.40% (Freddie Mac, week of October 15) |
| 10-year Treasury yield | 5.15% (October 19) |
✓ Verified
• The FOMC meets October 27-28; the decision is announced at 2 p.m. Eastern on October 28.
• The current federal funds target range is 3.75% to 4.00%, set by a unanimous 25 bps hike at the September 15-16 meeting, the first hike in three years.
• September CPI rose 0.6% in the month and 3.7% over the year, up from 3.4% in August; gasoline jumped 9.1% in September; core prices rose 2.6% over the year.
• The 30-year fixed mortgage averaged 7.40% in the week of October 15 (Freddie Mac); the 10-year Treasury yield closed at 5.15% on October 19.
• September meeting minutes (released Oct 7) say most officials think one more increase “would likely be appropriate by year end,”
• The next inflation report lands November 10, after the October meeting.
⚠ Still needs confirmation
• CME FedWatch (Oct 20) puts the odds of an October hold at about 83% and a quarter-point hike at about 17%.
• 94 of 100 economists in the Reuters October 16-20 poll expect a hold in October; all 100 expect a December hike.
• Norada expects one more quarter-point hike in December (to 4.00%-4.25%) and 30-year mortgages around 7% to 7.5% through year end, with no rate cuts in 2026.
• 38 of 92 Reuters poll respondents predict at least two further increases, and Mizuho’s Alex Pelle says the risk is greater of a 50 bps December move than of no hike at all.
Frequently Asked Questions
When does the Fed announce its October decision?
2 p.m. Eastern on Wednesday, October 28, after the October 27-28 meeting.
Will the Fed cut rates in October?
Essentially zero chance per CME FedWatch; the debate is hold versus hike.
What is the current rate?
3.75% to 4.00%, set at the September 15-16 meeting.
What does this mean for mortgages?
The 30-year fixed averaged 7.40% in the week of October 15; Norada expects 7% to 7.5% through year end with no cuts in 2026.
When is the next inflation report?
November 10, after the October meeting.
Editor’s note: All rate expectations in this article are forecasts as of October 20, 2026; the Federal Reserve announces its October decision at 2 p.m. Eastern on October 28.
