FOMC meets October 27-28: the Fed faces energy-driven inflation

The Federal Open Market Committee (FOMC), the Federal Reserve's policy-setting body, meets on October 27 and 28, 2026¹. On September 16, it raised its benchmark rate by a quarter percentage point, to a range of 3.75% to 4%, with all twelve voting members in favor². It was the first hike since July 2023, after six cuts between September 2024 and December 2025³.

Why the Fed raised rates

The September statement described economic activity expanding at a solid pace, an unemployment rate that has changed little, and inflation that remains elevated². The minutes of the meeting, released October 7, name the main cause: disruptions tied to the conflict drove up crude oil and fuel prices, which weighs on consumer prices as well as on business costs, from transportation to inputs⁴.

The data released since then point the same way:

• Consumer prices: up 0.6% in September and 3.7% from a year earlier. Energy rose 20.4% over the year, gasoline 34.2%⁵.
• Excluding food and energy: up 0.3% on the month and 2.6% from a year earlier⁵. Inflation is coming mainly from energy.
• Producer prices: up 1.3% in September⁶.
• Oil: West Texas Intermediate crude traded at $107.89 a barrel on October 20, compared with $58.66 a year earlier⁷.

What the Fed has already signaled

According to the minutes, most participants judged that another hike would likely be appropriate by the end of the year. They also said they would approach each meeting with no decision made in advance, guided by the data and the balance of risks⁴.

The projections released in September point in the same direction. Their median puts the benchmark rate at 4.1% at the end of 2026, and again at 4.1% at the end of 2027⁸. For inflation as measured by the PCE price index, they show 3.7% in 2026 and 2.3% in 2027; excluding food and energy, 3.4% and then 2.5%⁸.

The labor market isn't pulling the other way. The minutes describe it as stable and close to full employment⁴. The unemployment rate was 4.2% in September, and employers added 29,000 jobs according to the initial estimate⁶.

October or December?

Two meetings remain this year: October's, then December 8 and 9¹. The October meeting does not come with new projections: the next set is due in December¹.

In between, several releases will matter⁹:

What markets are watching

The two-year Treasury yield stood at 4.65% on October 22, and the 10-year yield at 4.96%¹⁰. The three-month Treasury bill yielded 4.22%, above the effective federal funds rate of 3.88%¹⁰, a gap that partly reflects expectations of another hike.

Ten-year expected inflation, read from the spread between regular Treasuries and inflation-protected Treasuries (TIPS), was 2.34% on October 23¹¹. The minutes had already noted that longer-term expectations remained stable, even as near-term inflation rose with oil prices⁴.

What about crypto?

For an asset that pays no yield, such as bitcoin, the real rate matters: it is what a risk-free investment returns once inflation is taken out. The 10-year real Treasury yield was 2.64% on October 22¹².

The other variable investors watch closely is liquidity in the financial system. Our article on the Fed's net liquidity breaks down its three components and how they have moved over two years.

Sources

1. Federal Reserve, FOMC meeting calendar. ↩
2. Federal Reserve, FOMC statement of September 16, 2026. ↩
3. Federal Reserve, history of policy rates. ↩
4. Federal Reserve, minutes of the FOMC meeting of September 15-16, 2026, released October 7, 2026. ↩
5. Bureau of Labor Statistics, Consumer Price Index for September 2026, October 14, 2026. ↩
6. Bureau of Labor Statistics, principal economic indicators, October 2026. ↩
7. FRED, WTI crude oil price (DCOILWTICO). ↩
8. Federal Reserve, Summary of Economic Projections, September 2026. ↩
9. FRED, economic release calendar. ↩
10. FRED, 2-year (DGS2), 10-year (DGS10), and 3-month (DGS3MO) Treasury yields and the effective federal funds rate (DFF). ↩
11. FRED, 10-year breakeven inflation rate (T10YIE). ↩
12. FRED, 10-year real Treasury yield (DFII10). ↩