Fed holds at 3.75% to 4.00% but two officials wanted another hike

What happened

The Federal Open Market Committee kept its target range for the federal funds rate at 3.75% to 4.00% on 28 October 2026. The vote was 10 to 2, according to the Fed’s statement. Governor Lisa Cook and Cleveland Fed President Beth Hammack voted against, and both preferred a quarter-point increase. The September decision, which raised rates for the first time since 2023, was 12 to 0.

The statement said inflation “remains elevated” and that activity is “expanding at a strong pace.” It said job gains have kept pace with workforce growth. It gave no path for the next move and did not mention energy prices.

Why it matters

The pause came after a hot inflation report. Consumer prices rose 3.7% in the 12 months to September, the Bureau of Labor Statistics reported on 14 October. Core inflation, which leaves out food and energy, was 2.6%. Energy was up 20.4%, gasoline 34.2% and fuel oil 74.2%. In the single month of September, the all-items index rose 0.6% and energy rose 5.2%, seasonally adjusted.

That is the test Novus Data set on 14 October. A pause would suggest officials see the energy shock fading. Two votes for a hike point the other way.

Market borrowing costs have eased slightly but remain high. The 10-year Treasury yield was 5.24% on 9 October, 5.05% on 28 October and 4.98% on 29 October, according to Treasury data. The 2-year yield was 4.80%, 4.67% and 4.61% on the same dates.

Higher real rates raise the cost of holding inventory and financing equipment, from trucks to warehouses, at a time when diesel is above $6 a gallon (inferred). The Fed statement does not make that link. We do.

When pump prices might ease

Not soon, on the EIA’s numbers. All of these are EIA forecasts, not Novus Data forecasts. Regular gasoline averaged $4.269 a gallon in the week of 26 October, down 1.5 cents on the week and $1.234 above a year ago. Diesel averaged $6.352, up 7.6 cents on the week and $2.634 above a year ago. The week before, diesel was $6.276.

The EIA’s October outlook, released 6 October, expects gasoline to be about the same in October as in September, when it averaged $4.35. It forecasts a fourth quarter average of $4.15, then $3.24 in the fourth quarter of 2027, and says prices will fall “slowly” as crude falls. For diesel it forecasts a fourth quarter average of $5.81 and an average of about $4.50 in 2027. It expects diesel to stay above $4 through 2027 because stocks are low.

Those forecasts depend on Hormuz. The EIA assumes Middle East oil flows stay constrained through the fourth quarter, that Brent averages $105 a barrel in the fourth quarter and falls to $87 by the second quarter of 2027, and that most Middle East production returns by the end of the second quarter of 2027. It also says lower wholesale prices will not immediately reach pump prices. The outlook does not include the 2 October G7 announcement, and the next outlook, on 10 November, is the first chance to see that reflected.

A Fed that keeps rates high while fuel stays high squeezes carriers and shippers from both sides. That is our inference, not something the EIA or the Fed says.

Who it reaches

Companies financing inventory and equipment (sector). The 2-year Treasury yield, a common benchmark for short-term borrowing, was 4.61% on 29 October, against 4.80% on 9 October. Confidence: reported for yields, inferred for borrowing costs. Source: US Treasury.

Fuel buyers and carriers (sector). Fuel oil prices were 74.2% higher than a year earlier in September. Confidence: reported. Source: BLS September CPI. The CPI does not report diesel on its own, so this is a related fuel, not the diesel price.

Home buyers and builders (sector). The average 30-year fixed mortgage rate was 7.24% on 29 October, down from 7.32% a week earlier and up from 6.17% a year earlier. Confidence: reported. Source: Freddie Mac Primary Mortgage Market Survey.

What would change this view

• October inflation. The next consumer price report is due on 10 November. A core reading above 2.6% would suggest energy costs are spreading into other prices.

• The minutes. The Fed publishes minutes of this meeting about three weeks after the decision. We estimate 18 November, but the Fed has not listed a date. They should show how many officials sided with Cook and Hammack.

• The December meeting. It is on 8 and 9 December and comes with new projections. More dissents would add to the case for a hike (inferred).

• Pump prices. Diesel rose to $6.352 this week. A weekly national average falling back under $6, or gasoline falling under $4, would be the clearest sign energy pressure is easing.

• Hormuz. Ship counts through the strait recovering would be the first sign the EIA’s assumption of constrained flows is easing.

Sources

1. FOMC statement, 28 October 2026. Federal Reserve. https://www.federalreserve.gov/newsevents/pressreleases/monetary20261028a.htm

   Consumer Price Index, September 2026. Bureau of Labor Statistics, 14 October 2026. https://www.bls.gov/news.release/archives/cpi_10142026.htm

2. Daily Treasury par yield curve rates, 2026. US Treasury. https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve&field_tdr_date_value=2026

3. FOMC meeting calendar. Federal Reserve. https://www.federalreserve.gov/monetarypolicy/fomccalendars.htm

4. CPI release schedule. Bureau of Labor Statistics. https://www.bls.gov/schedule/news_release/cpi.htm

5. Weekly retail gasoline and diesel prices, week of 26 October 2026. US Energy Information Administration. https://www.eia.gov/petroleum/gasdiesel/

6. Short-Term Energy Outlook, October 2026, released 6 October 2026. US Energy Information Administration. https://www.eia.gov/outlooks/steo/archives/oct26.pdf

7. Transcript of Chair Warsh’s press conference, 28 October 2026. Federal Reserve. https://www.federalreserve.gov/mediacenter/files/FOMCpresconf20261028.pdf

8. Primary Mortgage Market Survey, week of 29 October 2026. Freddie Mac. https://www.freddiemac.com/pmms

9. Fed lifts rates for the first time since 2023. Novus Data, 14 October 2026.

Novus Data publishes analysis and commentary, not investment advice. Nothing here is a recommendation to buy or sell any security.