Fed keeps rates steady as inflation squeezes working families

By Maya Ellison · Reporting from Detroit · October 28, 2026

The boardroom pause while grocery bills climb

On Wednesday, the Federal Reserve voted to hold its benchmark interest rate steady at 3.75% to 4%. Fox Business reported that the decision came amid elevated inflation right before the midterm elections. Federal Reserve Chairman Kevin Warsh and the Federal Open Market Committee made the call to pause after hiking rates in September. The FOMC voted 10-2 to maintain the target range. Officials claimed economic activity expands at a strong pace and job growth keeps pace with the workforce. But when consumers interrogate reality by looking out their windows and visiting gas stations, as Warsh noted, prices remain high.

That reality shows plainly in the federal data. According to the Consumer Price Index series from FRED, prices rose steadily and eroded the purchasing power of paychecks. NPR reported consumer prices were up 3.7% from a year ago. A spike in energy prices tied to the U.S. war with Iran pushed oil prices above $117 a barrel, as detailed by The Guardian. Dan North, a senior economist at Allianz Trade, told NPR the inflation line is going up, not down. He called the trajectory the wrong way. Yet the central bank chose a convenient moment for political hesitation. Nicholas Economides, a professor at NYU Stern Business School, told The Guardian that the election made radical action unlikely. Central bankers pretend their deliberations float above the partisan fray. Freezing interest rates right before an election smells of institutional self-preservation.

This political hesitation mirrors the darkest days of the Financial Crisis of 2008. Regulators and central planners bent over backward to shield financial institutions from their reckoning. They left ordinary homeowners to fend for themselves as foreclosure signs sprouted across my block in Flint. The mechanism is identical: protect the apex predators of capital while telling the working class to tighten their belts. Central bank hesitation to aggressively curb inflation allows price increases to erode the purchasing power of low-income workers, echoing the worst cycles of the Great Inflation.

Dissent from the hawks and the myth of broad pain

Only two members of the FOMC had the backbone to vote against the pause. Cleveland Fed President Beth Hammack and Fed Governor Lisa Cook dissented from the majority. They voted to raise interest rates by 25 basis points to combat stubborn inflation. Khaleej Times noted that the FOMC defended its hold by pointing to robust capital investment and strong productivity growth. But Mark Zandi, chief economist at Moody's Analytics, told NPR that lower and middle-income Americans struggle. He noted their purchasing power is declining, explaining why people feel bad about the economy.

Upper-income shoppers fuel resilient consumer spending thanks to a rising stock market. Meanwhile, average wages rose just 3% for the 12 months ending in September. Working families fall further behind. As I learned watching my mother teach public school while my father worked the GM line, 3% wage growth against 3.7% inflation is a pay cut dressed up in polite economic jargon.

Defenders of the pause argue that raising rates further would bludgeon a fragile economy without lowering energy costs. Economides argued to The Guardian that supply-driven inflation cannot be cured by interest rate hikes. He warned that hikes only slow down the economy when you do not want it to slow down. That argument sounds sophisticated until you see who actually slows down. High-flying tech sectors and artificial intelligence developers remain insulated from money costs. As Dan North observed to NPR, A.I. companies do not care what interest rate they pay. They drive up prices for electronic equipment and construction materials through data center construction. Meanwhile, prospective home buyers face a housing market stuck in a slump. Mortgage rates reached a high of 7.4%, according to NPR. The burden falls on zip codes that can least afford it.

The price stability shell game

The Federal Reserve's obsession with a 2% inflation target has become a shell game. The house always wins and the working class always loses. Kevin Warsh insisted that no soft inflation target exists. He claimed the central bank's sole responsibility is price stability measured by the Personal Consumption Expenditures price index. But that commitment to a 2% goal functions as a justification for inflicting pain on wage earners while sparing capital. During the inflationary period following the COVID-19 pandemic, the same script unfolded. Rate hikes hammered borrowers and middle-income families while corporate profit margins soared.

The Federal Reserve will follow this October pause with a rate hike in December. This move will deepen the squeeze on working families while corporate sectors like A.I. data-center developers shrug off higher borrowing costs. The precedent of Jerome Powell's 2022-2023 tightening cycle shows how higher rates hammered prospective home buyers and small businesses while leaving corporate profit margins insulated. Today's central bankers rely on the blunt instrument of rate hikes to combat supply-driven inflation. They punish ordinary consumers whose wages are stuck at 3% growth. The difference today is an artificial intelligence boom that cares nothing for capital costs.

We do not need another academic symposium on monetary strategy. Nor do we need eight FOMC meetings designed to give policymakers space for strategic deliberations, as Warsh announced. We need a monetary policy that recognizes that price stability means nothing if working people cannot afford rent, groceries, or gas. Until the Federal Reserve stops coddling asset owners and starts answering to families whose purchasing power it has systematically eroded, working people will continue to pay the price for a rigged system.

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US consumer price index. Source: Federal Reserve Economic Data (FRED).

Fed keeps rates steady as inflation squeezes working families

The boardroom pause while grocery bills climb

Dissent from the hawks and the myth of broad pain

The price stability shell game

Sources