Inflation rose 3.7% as Fed holds rates steady despite concerns over energy costs

Fed keeps benchmark rate unchanged

The Federal Reserve chose not to raise interest rates Wednesday, but said it remained focused on controlling inflation. Its rate-setting committee acknowledged in a statement that inflation was still elevated.

The benchmark rate stands at 3.75% to 4%. It helps determine the cost of short-term borrowing, including credit card lending.

Prices continue to climb

Dan North, a senior economist at Allianz Trade, said the inflation trend was moving in the wrong direction. The article links added price pressure to rising energy costs related to the U.S. war with Iran.

Dissent and December expectations

A rate increase at the next meeting in December is widely expected as the Fed seeks to cool demand and bring prices under control. The decision came less than a week before midterm election votes were to be tallied; North said a hike before the election could have seemed suspicious.

Borrowing costs and economic effects

Long-term rates are set by the bond market, though Fed decisions can influence them. Mortgage rates reached 7.4% earlier this month, a three-year high, before easing slightly. Expensive home loans have weighed on a housing market described as being in a slump for four years.

Investment in artificial intelligence has continued despite higher rates. North said AI companies were not deterred by borrowing costs, while the push to build data centers is driving up prices for construction materials and electronic equipment.