Fed expected to leave interest rates unchanged in October, says CNBC
According to a report from cnbc.com, the Federal Reserve will likely keep interest rates steady during its upcoming October meeting, even though surging energy expenses complicate price projections and add further strain to family finances. With the consumer price index bringing the annual inflation rate up to 3.7%, fed funds futures priced in less than a 10% chance that the central bank will raise rates by another quarter point during its meeting.
Oil Prices Drive Broad-Based Inflation Before Fed Meeting
Inflation remains the primary problem in the U.S. economy, showing signs of becoming increasingly broad-based according to Heather Long, chief economist at Navy Federal Credit Union. Surging oil prices stemming from the U.S. war with Iran drove the producer price index higher through September, with Brent crude oil trading at a five-month high before a slight decline. Nearly 75% of market participants expect at least one rate hike by the end of the year.
“Inflation is still the No. 1 problem in the U.S. economy, and there are a lot of signs it is getting more broad-based,” said Heather Long, chief economist at Navy Federal Credit Union. “For consumers, it means really high borrowing costs for the foreseeable future.”
The central bank meets just days before the midterm elections, marking the final word on inflation in the U.S. before voters head to the polls. “Given that it’s right before an election, they won’t hike in October,” Long noted. Historical data indicates the Fed has maintained its course during previous midterms, raising rates near elections in 1978, 1982, 2018, and 2022 to counter rising inflation, as observed by Mark Shore, director and economist at CME Group. Meanwhile, Federal Reserve Chairman Kevin Warsh has expressed a firm commitment to bringing inflation down to the 2% target.
High Borrowing Costs Strain Household Affordability
“If the Fed holds, markets could question the Fed’s inflation-fighting credibility,” said Bank of America economist Aditya Bhave in a research note published on Oct. 23. While the benchmark rate dictates overnight interbank loans and influences broader borrowing and savings products, sustained elevated rates continue to strain household affordability.
Longer-term borrowing costs are driven primarily by inflation expectations and broader economic conditions. Higher longer-term rates are doing more damage to consumer wallets, weighing heavily on refinancing activity, homebuying, and vehicle sales according to Mark Zandi, chief economist at Moody’s. Short-term rate increases also hurt by raising costs on credit cards, consumer finance loans, and home equity lines.
| Borrowing Product | Current Market Metric | Primary Driver |
|---|---|---|
| Credit Cards | 23.96% average interest rate on new offers | Federal Reserve benchmark rate |
| Mortgages | 7.4% average rate on 30-year fixed loans | 10-year U.S. Treasury yields |
| Crude Oil | Trading near a five-month high | Geopolitical conflict involving Iran |
Impact Across Consumer Financial Products
Credit card annual percentage rates remain near current levels because most carry variable rates tracking the central bank’s benchmark. LendingTree data shows the average interest rate on a new credit card offer sitting at 23.96%. Mortgage rates instead respond to Treasury yields and broader economic forecasts. Data from Mortgage News Daily showed that the 10-year U.S. Treasury stayed close to 5%, maintaining the typical 30-year fixed mortgage rate near 7.4%.
Auto loan rates factor in the federal funds benchmark, pushing car buyers to take on larger loans and extend repayment terms to manage affordability challenges reported by Edmunds. Federal student loan rates remain fixed for the life of the loan, though new borrowers face higher rates for the academic year following the 10-year Treasury note auction held in May. Savers continue to benefit from relatively attractive yields on high-yield savings accounts because deposit products track changes in the federal funds rate.