Fed meets next week after September rate hike as inflation runs at 3.7 percent

The Federal Reserve’s rate-setting committee is scheduled to meet Tuesday and Wednesday, Oct. 27-28, its first gathering since it raised short-term interest rates in September. Policymakers will weigh a fresh rise in consumer inflation against a job market that added few positions last month.

At its last meeting, the Federal Open Market Committee voted 12-0 on Sept. 16 to raise the federal funds target range by a quarter percentage point, to 3.75 percent to 4 percent. The statement said “Inflation remains elevated” and that the move “will support a timelier return to the Committee’s 2 percent goal.”

That decision followed a split vote in July, when the committee held rates at 3.5 percent to 3.75 percent. Three regional bank presidents, Beth M. Hammack, Neel Kashkari and Lorie K. Logan, dissented in favor of a quarter-point increase at that meeting.

Inflation picked up in September

The most recent consumer price report, released by the Bureau of Labor Statistics on Oct. 14, showed the Consumer Price Index rose 0.6 percent in September after a 0.4 percent increase in August. Over the past 12 months, prices were up 3.7 percent, compared with 3.4 percent through August.

So-called core inflation, which excludes food and energy and is watched closely by the Fed, rose 0.3 percent in September and 2.6 percent from a year earlier, up from 2.4 percent, according to the BLS. Shelter costs rose 0.4 percent for the month, used cars and trucks rose 0.7 percent and airline fares rose 1.2 percent. Grocery prices dipped 0.1 percent, while prices at restaurants and other food-away-from-home outlets rose 0.2 percent.

Hiring slowed, unemployment held steady

The labor market sent a more subdued signal. Employers added 29,000 jobs in September, the BLS reported Oct. 2, and the unemployment rate was 4.2 percent. The rate has stayed between 4.1 percent and 4.3 percent since March.

Revisions lowered earlier figures. July payrolls were revised to a loss of 10,000 jobs from a previously reported gain of 21,000, and August was revised to 133,000 from 162,000, leaving the two months a combined 60,000 jobs lower than first reported. Average hourly earnings rose 0.1 percent to $37.81 and were up 3.0 percent over the year, the report said. That annual wage gain is below the 3.7 percent rise in overall consumer prices.

Shoppers kept spending

Consumer spending at stores has held up. Retail and food services sales rose 0.8 percent in September to $745.0 billion, according to advance estimates the Census Bureau released Oct. 15, and were up 6.3 percent from September 2025. Those figures are not adjusted for price changes. August’s monthly gain was revised up to 1.3 percent.

Borrowing costs remain high for homebuyers

Mortgage rates eased slightly this week but remain well above last year’s levels. Freddie Mac’s Primary Mortgage Market Survey for Oct. 22 put the average 30-year fixed rate at 7.32 percent, down from 7.40 percent a week earlier but up from 6.19 percent a year ago. The 15-year fixed rate averaged 6.68 percent.

What comes next

The Fed’s calendar does not list a Summary of Economic Projections for the October meeting; the next set of officials’ forecasts is tied to the Dec. 8-9 meeting, the committee’s last of the year.

Policymakers will not have October’s jobs or inflation data in hand next week. The BLS has scheduled the October employment report for Nov. 6 and the October Consumer Price Index for Nov. 10. The Census Bureau’s October retail sales estimate is set for Nov. 17.