Fed to hit pause on rate hikes, but maybe not for long

By Ann Saphir

Mon, October 26, 2026 at 3:22 AM PDT 4 min read

By Ann Saphir

Oct 26 (Reuters) - Federal Reserve policymakers have telegraphed they will not raise US short-term borrowing costs again this week, but with inflation concerns still front and center, investors believe a rate-hike pause will not last for long.

Data due just one day after the Fed's anticipated decision to hold rates steady in the 3.75%-4.00% range will underscore why. Inflation picked up last month and broadened well beyond rising fuel prices, and US economic growth accelerated last quarter, government reports are expected to show, with gains powered by solid consumer spending and surging business investment driven by demand for AI.

Meanwhile the labor market has been stable: The unemployment rate was 4.2% last month and weekly unemployment insurance claims are running lower than at any point in Fed Chairman Kevin Warsh's lifetime.

Indeed, analysts say, were it not for a…