The Federal Reserve held interest rates steady on Wednesday, leaving its benchmark range at 3.75% to 4% — one meeting after it raised rates for the first time since 2023. The decision, approved in a 10-2 vote, came with two dissents: Governors Lisa Cook and Beth Hammack both wanted another quarter-point hike now, according to the NY Post.

The hold is a pause, not a pivot. "Inflation remains elevated," the Fed's rate-setting committee said in its statement, and the data since September has only hardened that case. Consumer prices rose 3.7% over the year through September, while producer prices jumped 6.3% — a sign that cost pressures could keep climbing through the holiday season.

What makes this cycle different from the last tightening round is what's driving prices. Alongside the lingering energy shock from the war with Iran and the holdover effects of tariffs, Fed officials now point to strong demand from the artificial intelligence industry itself: the data-center buildout, the chip orders, the power contracts. The AI boom isn't just a stock-market story anymore. It's an input to monetary policy.

That puts tech in an unusual bind. The same companies pouring tens of billions into AI infrastructure — SpaceX just borrowed $40 billion for GPUs, Broadcom just bankrolled Anthropic with a $63 billion debt deal — are doing it into a rate regime that may still have one more hike in it. Traders are pricing roughly a 75% chance of at least one more increase by year-end, and most officials at the September meeting said another hike would be needed this year.

The timing is also political, whether the Fed likes it or not. The decision lands less than a week before the November 3 midterms, with affordability dominating the campaign and Americans frustrated by prices at the pump and the grocery store. Traders had anticipated the Fed would hold off in October over fears of appearing politicized.

The next signals come fast. Chair Kevin Warsh holds his press conference Wednesday afternoon, and after the closing bell, Alphabet and Microsoft report earnings — the first read on whether the AI trade's profits are keeping pace with its borrowing costs. December is the real decision point. The Fed just told the market it isn't done yet — it's waiting for the data to tell it how much more this boom is going to cost.

— via NY Post