Federal Reserve holds interest rates steady despite high inflation

The Federal Reserve held interest rates steady on Wednesday after hiking to clamp down on inflation. The central bank left the federal funds rate at a target range of 3.75% to 4%, keeping it unchanged after raising rates last month for the first time in three years. In a statement, the Fed said economic activity is growing at a "strong pace" while acknowledging that inflation remains elevated. The Fed's benchmark rate is its main weapon for stabilizing consumer prices, which have crept up in recent months. The latest rate decision comes less than a week before Americans head to the polls for the midterm elections, where affordability issues will be top of mind for voters. President Trump has long urged the Fed to ease borrowing costs.

Stubborn inflation has kept global energy costs elevated, making it harder to bring down prices in the U.S. Last month, the closely watched Consumer Price Index ; core inflation, which strips out volatile food and energy prices, rose 2.6% from a year ago. Both measures were above economists' expectations. Solid economic growth and steady consumer spending are also exerting upward pressure on prices, complicating the task of taming inflation, according to economists. The two hawkish dissents, the wording of the policy statement, and prior comments from officials all suggest the central bank will hike rates in December.

The has kept global energy costs elevated, making it harder to bring down prices in the U.S. Last month, the closely watched Consumer Price Index ; core inflation, which strips out volatile food and energy prices, rose 2.6% from a year ago. Both measures were above economists' expectations. Solid economic growth and steady consumer spending are also exerting upward pressure on prices, complicating the task of taming inflation, according to economists. The two hawkish dissents, the wording of the policy statement, and prior comments from officials all suggest the central bank will hike rates in December.

The federal funds rate, what banks charge each other for overnight loans, influences the cost of borrowing across the U.S. economy. A rate hike can spur higher borrowing costs for bank loans, credit cards and auto loans, while boosting returns for savings accounts. The Fed's pause in rate hikes could provide borrowers with some breathing room, Bankrate home lending expert Linda Bell said, citing potential relief for home equity rates. Still, consumers may be in for higher borrowing costs down the road. Matt Schulz, a chief consumer finance analyst at LendingTree, said it's possible some loan rates could continue to climb heading into the holiday shopping season.