Fed holds rates steady in Columbus ahead of midterms

Columbus residents will see no change in their short-term borrowing costs this week. The Federal Reserve decided to leave its benchmark interest rate at 3.75% to 4% on Wednesday. This rate sets the floor for other short-term lending, including the interest charged on credit cards.

The central bank has been battling high prices since it began raising rates in September. That was the first increase in more than three years. Since then, consumer prices have continued to climb. In September, prices rose 3.7% from the previous year. That is a larger annual increase than in the month before. Energy prices, driven by the U.S. war with Iran, have added to the pressure.

The Fed’s rate-setting committee noted in a statement that inflation remains elevated. Dan North, a senior economist at Allianz Trade, described the trend as the "wrong way." He pointed out that the inflation line is going up instead of down. Two members of the committee wanted to act faster. Fed governor Lisa Cook and Beth Hammack of the Cleveland Federal Reserve Bank voted to raise rates by a quarter percentage point. The rest of the group chose to pause.

Analysts suggest the timing of the decision was influenced by the political calendar. The vote on Wednesday occurred less than a week before the midterm election. North said it would be suspicious for the Fed to hike rates immediately before voters go to the polls. A rate increase is widely expected at the next meeting in December.

Higher interest rates have already affected the local housing market. Mortgage rates hit a three-year high of 7.4% earlier this month. They have eased slightly since then, but the high cost of home loans continues to weigh on a market that has been sluggish for four years. Construction materials and electronic equipment prices are also rising due to the boom in artificial intelligence data centers.

The economic impact is not felt evenly across the region. Upper-income shoppers who benefit from a rising stock market are spending freely. However, average wages rose only 3% for the 12 months ending in September. That pace has not kept up with the cost of living for many families. Mark Zandi, chief economist at Moody's Analytics, said lower and middle-income Americans are struggling with declining purchasing power.

The Fed signaled it is not done fighting inflation. The committee renewed its pledge to deliver price stability. The next scheduled policy meeting is in December, where a rate hike is the likely outcome.