# Federal Reserve Expected to Hold at 3.75% to 4% Today as New Zealand's Central Bank Skips a Hike Markets Had Priced In

Futures traders see little chance of a Fed move today but a strong chance of a December increase, while the Reserve Bank of New Zealand's 4-3 vote to hold pushed the New Zealand dollar lower against every major currency.

- Published: 2026-10-28T05:14:20.076Z
- Canonical: https://polylog.news/2026-10-28/federal-reserve-expected-to-hold-at-3-75-to-4-today-as-new-z
- Publisher: Polylog (Global desk)
- Section: macro
- Sources: [Mint (Economy)](https://www.livemint.com/economy/us-fed-decision-what-kevin-warsh-s-next-move-could-be-as-inflation-stays-above-3-and-jobs-weaken-3-things-to-watch-11793149180952.html), [Investing.com Economy](https://www.investing.com/news/economy-news/morning-bid-rbnz-throws-markets-a-curveball-4977464), [CNBC](https://www.cnbc.com/2026/10/27/federal-reserve-rates-kevin-warsh.html), [Newsquawk](https://www.newsquawk.com/headlines/rbnz-keeps-ocr-unchanged-at-275-exp-25bps-hike-with-the-decision-made-by-4-3-vote)

The Federal Reserve announces its rate decision at 2 p.m. Eastern time on Wednesday. Investors expect it to hold the federal funds rate at 3.75% to 4% after raising it by a quarter point in September, [CNBC reported](https://www.cnbc.com/2026/10/27/federal-reserve-rates-kevin-warsh.html). CME FedWatch pricing showed about an 11% chance of a hike this week and roughly 82% for December, according to [USAGOLD's market report](https://www.usagold.com/daily-precious-metals-market-report-october-27-2026/). Kevin Warsh, the Fed chair, has rejected traditional forward guidance and distanced himself from other officials' rate projections, so investors will focus on his press conference.

The Fed faces conflicting data. [Mint](https://www.livemint.com/economy/us-fed-decision-what-kevin-warsh-s-next-move-could-be-as-inflation-stays-above-3-and-jobs-weaken-3-things-to-watch-11793149180952.html) notes that inflation remains above 3%, well over the 2% target, while housing and employment weaken. Long-term borrowing costs have risen nonetheless. [Trading Economics](https://tradingeconomics.com/united-states/government-bond-yield/news/593292) put the 10-year Treasury yield around 5.1% in the days before the meeting and said high oil prices were pushing yields up worldwide. The Fed's preferred inflation gauge, the personal consumption expenditures (PCE) price index, is due on Thursday.

In Wellington, the Reserve Bank of New Zealand (RBNZ) held its official cash rate at 2.75% by a 4-3 vote. Markets and all five major New Zealand banks had expected a quarter-point increase to 3%, [Newsquawk reported](https://www.newsquawk.com/headlines/rbnz-keeps-ocr-unchanged-at-275-exp-25bps-hike-with-the-decision-made-by-4-3-vote). The committee said tighter policy is likely to be required, [Nikkei Asia reported](https://asia.nikkei.com/business/markets/currencies/new-zealand-central-bank-stands-pat-signals-future-hikes). The New Zealand dollar fell against every major currency after the announcement, according to [Babypips](https://www.babypips.com/analysis/headline-rbnz-rate-statement-shock-breaking-down-surprise-hold-2026-10-28). Reuters' [Morning Bid column](https://www.investing.com/news/economy-news/morning-bid-rbnz-throws-markets-a-curveball-4977464) described the decision as the surprise of the Asian session.

From a sound-money perspective, the Fed's policy is less restrictive than the term "tightening" suggests. A policy rate of 3.75% to 4% is only about one point above inflation running above 3%, so the real cost of short-term credit remains low. The bond market is doing more of the tightening than the central bank is. New Zealand's split vote shows how quickly a central bank delays action when growth weakens, even with inflation above target.

## What this means

The Fed's benchmark rate is only slightly above current inflation, so most of the restraint on borrowing is coming from long-term yields near 5% rather than from the policy rate itself. Those yields set mortgage rates, corporate refinancing costs and the dollar cost of emerging-market debt. US housing and highly leveraged borrowers are exposed through interest rates, while importers of dollar-priced oil are exposed through a strong dollar. A hold today is already priced in. What is not settled is how the Fed handles an oil shock after November 3. The shock raises headline inflation and lowers growth at the same time, so it makes a December hike both more justified and harder to deliver. Market pricing that treats a December hike as nearly certain may be overconfident. New Zealand showed on Wednesday that a central bank facing weak growth will defer a hike that markets had treated as settled. The 1970s precedent applies. The Fed under Arthur Burns raised nominal rates while real rates stayed near zero, and inflation kept rising until Paul Volcker pushed real rates clearly positive after 1979. The desk's read is that Warsh holds today and keeps December open without committing, and that the dollar and long yields stay firm into the next meeting. If Brent stays above $110 through November and Thursday's PCE reading does not soften, the December hike goes ahead. This read is wrong if November payroll data show a sharp contraction, in which case the Fed follows New Zealand and holds through year-end.

## What to watch

- Whether Warsh describes December as live or defers to the data, since markets have nearly fully priced a December hike and any retreat would weaken the dollar.
- Thursday's PCE price index, which tests whether the September inflation reading was a one-off or a trend.
- The 10-year Treasury yield after the decision. A rise alongside a Fed hold would mean bond investors doubt the Fed's resolve on inflation.