Fed to skip October but raise rates again in December, nearly all economists say

By US Daily Tribune Newsroom, Economy Desk — Published October 22, 2026

Key Takeaways
The Background & Context
Why This Matters
Reactions & Analysis
What Happens Next
Frequently Asked Questions

The Federal Reserve appears poised to hold interest rates steady at its upcoming October meeting, only to resume its inflation-fighting campaign with another hike in December, according to a new consensus among economists. This strategic pause—followed by renewed tightening—reflects the central bank’s delicate balancing act as it seeks to cool an overheating economy without tipping millions of Americans into unemployment. The decision to skip October but raise rates later carries profound implications for mortgage holders, small business owners, and anyone navigating the uncertain terrain of borrowing costs and job security.

Nearly all economists surveyed anticipate this two-step approach, signaling that the Federal Reserve’s battle against inflation is far from over. While Wall Street has been bracing for volatility, Main Street Americans are watching closely. Every rate decision ripples through car loans, credit cards, and business expansion plans. The Fed’s next moves will shape holiday spending, hiring decisions, and the financial stability of households already stretched thin by elevated prices.

This forecast comes at a critical juncture. Inflation has moderated from its peak but remains stubbornly above the Fed’s 2% target. Jobs data continues to show resilience, complicating the central bank’s calculus. The question now is whether the economy can withstand another rate increase without breaking—or whether the Fed risks doing too much, too late.

Key Takeaways

Nearly all economists surveyed expect the Federal Reserve to hold interest rates steady at its October meeting, marking a strategic pause in its rate-hiking cycle.
The consensus forecasts a resumption of rate increases in December, indicating that policymakers believe additional tightening is necessary to bring inflation under control.
This skip-then-raise strategy reflects the Fed’s cautious approach as it monitors incoming economic data on inflation, employment, and consumer spending.
The decision will directly affect borrowing costs for mortgages, auto loans, credit cards, and business financing across the United States.
Wall Street and Main Street alike are preparing for continued uncertainty as the central bank walks a tightrope between fighting inflation and preserving economic growth.
The timing of the December rate hike could influence holiday consumer spending and year-end business investment decisions.

The Background & Context

The Federal Reserve has been engaged in one of the most aggressive monetary policy campaigns in modern history. Since early 2022, the central bank has raised its benchmark interest rate from near zero to levels not seen in decades, all in an effort to combat inflation that at its peak exceeded 9%—the highest in forty years. These rate hikes work by making borrowing more expensive, which in turn slows consumer spending and business investment, theoretically cooling demand and bringing prices back down.

But the Fed’s task has been anything but straightforward. The U.S. economy has proven remarkably resilient, with the labor market continuing to add jobs month after month even as interest rates climbed. Unemployment remains near historic lows, and consumer spending has held up better than many analysts expected. This strength has been a double-edged sword: it’s good news for workers and businesses, but it also means that inflationary pressures persist.

In recent months, the pace of rate increases has slowed considerably. After a series of aggressive three-quarter-point hikes in 2022, the Fed shifted to smaller quarter-point moves earlier this year before pausing altogether over the summer. This pattern of hiking, pausing, and potentially hiking again reflects the central bank’s data-dependent approach. Policymakers have repeatedly emphasized that they need time to assess how previous rate increases are filtering through the economy—a process that can take months or even longer.

The October skip would give the Fed additional time to evaluate several key indicators. Inflation has cooled from its peak but remains above the central bank’s 2% target. Core inflation, which strips out volatile food and energy prices, has been particularly sticky. Meanwhile, the jobs market shows signs of gradual cooling but no dramatic collapse. Wage growth has moderated but continues at a pace that could sustain inflationary pressures if not carefully managed.

Why This Matters

For ordinary Americans, the Fed’s interest rate decisions are far from abstract. They determine how much it costs to borrow money—and that affects nearly every major financial decision families and businesses make. Mortgage rates, which loosely track the Fed’s policy moves, have more than doubled since 2021, pricing millions of would-be homebuyers out of the market. A 30-year fixed mortgage that might have carried a 3% rate two years ago now hovers around 7% or higher, adding hundreds of dollars to monthly payments.

Credit card interest rates have similarly surged, making it more expensive for households to carry balances. Auto loans have become pricier, and small businesses face higher costs when they seek financing for expansion or inventory. The cumulative effect is a significant drag on economic activity, which is precisely what the Fed intends—but it also means real pain for real people.

The decision to skip October but raise rates in December suggests the Fed believes its work is not yet done. Inflation may have eased, but it hasn’t been vanquished. If the central bank were to declare victory prematurely and stop raising rates, prices could accelerate again, forcing even more painful measures down the road. The risk of doing too little is that inflation becomes entrenched in the economy, eroding purchasing power and undermining long-term stability.

Yet there’s also danger in doing too much. Raise rates too aggressively, and the economy could tip into recession. Jobs would disappear, businesses would shutter, and the financial pain would spread far beyond the abstract realm of monetary policy. The Fed is trying to engineer what economists call a “soft landing”—slowing the economy just enough to tame inflation without triggering a full-blown downturn. It’s a feat that has eluded policymakers many times in the past.

For workers, the stakes are particularly high. While low unemployment is good news, it also means the Fed may feel it has room to tighten further without causing mass layoffs. But that calculus could change quickly if economic conditions deteriorate. The lag between rate hikes and their full economic impact means that decisions made today could still be reverberating through the job market months from now.

Reactions & Analysis

The near-unanimous economist consensus reflects a careful reading of the Federal Reserve’s recent communications and economic data. Central bank officials have been clear that they view inflation as still too high and have signaled a willingness to raise rates further if necessary. At the same time, they’ve emphasized the importance of proceeding carefully and monitoring the effects of past policy moves.

Financial markets have been digesting this outlook with a mixture of caution and volatility. Wall Street tends to dislike uncertainty, and the prospect of another rate hike in December—even after a pause in October—has kept investors on edge. Bond yields have fluctuated, stock prices have swung, and currency markets have reacted to every new piece of economic data that might influence the Fed’s decision-making.

For business leaders, the forecast creates a challenging planning environment. Companies must decide whether to invest in new projects, hire additional workers, or pull back and wait for greater clarity. The October pause offers a brief window to assess conditions, but the anticipated December hike means that borrowing costs will likely remain elevated for the foreseeable future.

Consumer sentiment has also been shaped by the Fed’s actions. Many Americans are frustrated by persistent inflation, even as the rate of price increases has slowed. Groceries, rent, and gasoline remain more expensive than they were before the pandemic, and higher interest rates add to the financial squeeze. The hope is that continued Fed action will eventually bring prices fully under control, but the timeline remains uncertain.

What Happens Next

The path forward depends heavily on incoming economic data. Between now and December, the Fed will receive multiple reports on inflation, employment, consumer spending, and business activity. Any significant surprises—either positive or negative—could alter the central bank’s calculus. If inflation continues to moderate and the labor market shows clear signs of cooling, the Fed might reconsider the need for another rate hike. Conversely, if price pressures re-accelerate or the economy proves even more resilient than expected, policymakers could opt for a larger increase or signal additional moves in 2024.

The October meeting itself will still be important, even if no rate change occurs. The Fed’s policy statement and any accompanying commentary from Chair Jerome Powell will be scrutinized for clues about the central bank’s thinking. Markets will parse every word for hints about the likelihood and magnitude of a December hike.

Looking beyond December, the big question is how long rates will remain elevated. Even if the Fed pauses after another increase, it’s unlikely to cut rates quickly. Central bankers have learned from past episodes that premature easing can allow inflation to roar back. The consensus among economists is that rates will stay high well into 2024, and possibly beyond, depending on how the economy evolves.

For American households and businesses, this means adapting to a higher-rate environment for an extended period. Strategies that worked in the era of near-zero interest rates—cheap borrowing, aggressive expansion, speculative investment—may no longer be viable. The new reality requires greater financial discipline, more careful planning, and a sober assessment of risks.

Frequently Asked Questions

Why is the Fed expected to skip October but raise rates in December?

The Federal Reserve wants additional time to assess how previous rate increases are affecting the economy before making another move. By pausing in October, policymakers can review fresh data on inflation, jobs, and consumer spending. The anticipated December hike reflects the consensus view that inflation remains too high and additional tightening will be necessary to bring it back to the Fed’s 2% target.

How do interest rate increases affect ordinary Americans?

When the Fed raises rates, borrowing becomes more expensive across the board. Mortgage rates increase, making homeownership less affordable. Credit card interest rates rise, costing more for those carrying balances. Auto loans and business financing also become pricier. The goal is to slow spending and investment, which helps reduce inflation—but it also means higher costs for families and businesses in the short term.

What is a “soft landing” and can the Fed achieve one?

A soft landing occurs when the central bank slows the economy enough to control inflation without triggering a recession. It’s a delicate balance that requires precise timing and a bit of luck. Historically, soft landings have been difficult to achieve because the effects of rate hikes can be unpredictable and take time to fully materialize. The Fed is attempting this feat now, but success is far from guaranteed.

What should consumers and businesses do in response to these rate expectations?

Consumers should be cautious about taking on new debt, especially variable-rate loans that will become more expensive as rates rise. Paying down high-interest credit card balances is wise. Businesses should carefully evaluate expansion plans and consider locking in financing before rates increase further. Both households and companies should build financial cushions to weather potential economic turbulence as the Fed continues its inflation fight.

As the Federal Reserve navigates these treacherous waters, millions of Americans are watching and waiting. The decisions made in the coming months will shape the economic landscape for years to come, determining not just the pace of inflation but the availability of jobs, the affordability of homes, and the overall health of the U.S. economy. The skip-then-raise strategy may be the prudent path, but it’s also a reminder that the road to economic stability is rarely smooth or predictable.