The Fed Paused, but Two Officials Wanted a Hike, and Growth and Inflation Both Came In Strong

On October 28, 2026, the US Federal Reserve kept the federal funds target range at 3.75–4.00%, where it has been since a quarter-point hike in September. The vote was 10–2: Governor Lisa Cook and Cleveland Fed President Beth Hammack dissented, preferring to raise rates by another 0.25 percentage point. The next morning, October 29, the data backed the hawks. The Bureau of Economic Analysis (BEA) estimated third-quarter GDP growth at 3.4% at an annual rate, above the 3.1% forecast, and the PCE price index, the Fed's preferred inflation gauge, rose 0.5% in September, the largest monthly increase since March.

The pause does not mean the end of tightening: the December decision now depends on the next jobs and inflation reports, and bond and currency markets are already trading that question.

Sources: Federal Reserve: October 28 statement, BEA: Q3 GDP advance estimate, CNBC: GDP and September PCE.

What two votes against tell you

A dissent is a public signal: an official who votes against the majority tells the market which way they think policy should move next. Here both dissenters wanted tighter policy. According to CNBC, it was Cook's first dissent since she joined the Board in 2022. Meanwhile, Dallas Fed President Lorie Logan and Minneapolis Fed President Neel Kashkari, who had voted for a hike in July, joined the majority this time. So the hawkish camp is wider than the two dissents; its members differ mainly on timing.

The wording changed too. In September, the Committee described growth as expanding "at a solid pace" and hiked 12–0. In October, activity was expanding "at a strong pace," inflation "remains elevated," and uncertainty "remains elevated owing, in part, to geopolitical developments." The statement also repeated a firm line: "The Committee will deliver price stability."

At his press conference, Chair Kevin Warsh avoided any promises. "I don't believe in forward guidance absent exigent circumstances, absent a crisis," he said, as quoted by Invezz. CNBC cited another of his remarks: "If we had a firm conclusion about the conduct of monetary policy, we'd announce it to much fanfare today." Without guidance, each new data release carries more weight. We covered how Warsh came to lead the Fed in our post on his confirmation.

Sources: Federal Reserve: October 28 statement, CNBC: the decision and the dissents, Federal Reserve: September 16 statement, Invezz: Warsh's press conference.

Strong growth plus energy prices: why tightening is still on the table

The BEA's advance estimate shows growth speeding up: 3.4% in the third quarter after 2.2% in the second. Real final sales to private domestic purchasers, which combine consumer spending and private fixed investment and leave out inventories, government spending and trade, rose 4.9% after 4.6%. Domestic demand itself is strong.

On inflation, the quarterly and monthly figures tell different stories. The quarterly PCE price index rose 2.1% at an annual rate in the third quarter, down from 5.0% in the second, and the core index, which excludes food and energy, rose 2.5% after 3.3%. But the quarterly number averages three months, and the acceleration came at the end of the quarter. In September alone, headline PCE prices rose 0.5% on the month and 3.6% on the year, up from 3.4% in August. Core prices rose 0.3% on the month and 3.1% on the year, up from 3.0%. Gasoline and other energy goods jumped 9.2% in a single month, while services excluding energy and housing rose 0.4%.

The mechanism is this. Expensive energy alone is an external shock that interest rates cannot fix. It becomes a problem for the Fed when strong demand lets businesses pass higher fuel and transport costs into the prices of other goods and services. That is why the Fed is watching core inflation and services so closely. Strong demand also undercuts the main argument for a pause, that the economy needs protecting. Initial jobless claims of 194,000 for the week ended October 24 do not point to a weakening labor market either. For background on why a Fed under Warsh came under pressure to hike, see our post on the "Warsh paradox".

Sources: BEA: Q3 GDP advance estimate, CNBC: GDP and September PCE, Invezz: the prior PCE readings.

How December odds move yields, bond prices and growth stocks

The next Fed meeting is December 8–9, and it comes with new economic projections. According to Invezz, right after the PCE release on October 29 markets priced the chance of a quarter-point hike in December at about 85%, and by Friday at roughly 73%. MUFG analysts, cited in the same piece, put their own probability at 55%. These are futures-based estimates, not forecasts.

Short-dated bonds react to hike expectations first. The 2-year Treasury yield largely reflects where markets expect the Fed's rate to be over the next two years. On October 30, CNBC reported it at about 4.59%. The 10-year yield stood near 4.93% and the 30-year near 5.31%. When yields rise, the prices of bonds already issued fall, and the longer a bond's maturity, the bigger the drop.

October showed that the link is not mechanical. Even with a hawkish Fed, the 10-year yield fell by about a third of a percentage point over the month, according to Trading Economics, as investors fled a selloff in technology stocks and bought Treasuries as a safe haven. Long-term yields also depend on growth expectations and demand for safety.

Growth stocks are especially sensitive to rates: much of their value rests on profits expected years from now, and higher yields make those future profits worth less today. If markets come to treat a December hike as settled, technology shares may feel it more than the market as a whole.

Sources: Federal Reserve: FOMC calendar, Invezz: December odds, CNBC: Treasury yields on October 30, Trading Economics: the 10-year yield in October.

What it means for Ukraine: the dollar, dollar yields and the hryvnia

Higher US rates make dollar assets more attractive worldwide. That usually supports the dollar against emerging-market currencies and makes borrowing more expensive for countries and companies that raise money in dollars. For a Ukrainian investor, this works in two ways.

The first is the hryvnia. On October 28, the National Bank of Ukraine (NBU) set a record official rate of UAH 45.6008 per dollar; for October 30 it was UAH 45.5293. The hryvnia's main drivers are domestic, namely falling exports after Russian strikes and the NBU's interventions, which we covered in our post on the hryvnia's record low. But a strong dollar does not make the NBU's job any easier. On October 29, the NBU raised its key policy rate from 16% to 16.5%, effective October 30, citing stronger price pressure and worsening inflation expectations. According to Minfin, the NBU said the hike is meant to support the appeal of hryvnia assets and keep the currency market stable.

The second is the yield on dollar savings. While the Fed holds rates near 4% and leaves the door open to a hike, short-term US Treasury bills, which Ukrainians can buy through brokers, tend to yield close to the Fed's rate. A dollar deposit at a Ukrainian bank is a different product with its own rate, so the gap between the two is worth checking before you decide where to keep your dollar reserve.

Sources: Minfin: official rate for October 28, Minfin: official rate for October 30, Minfin: NBU decision of October 29.

Practical takeaway for investors

• Read dissents as a signal of direction: two votes for a hike at a pause suggest the bar for another hike is low; they do not mean tightening is over.
• Watch core inflation and services rather than the headline number: they show whether the energy shock is spreading through the economy.
• Mark the dates that will decide December: the October jobs report on November 6, October CPI on November 10, the second GDP estimate and October PCE on November 25, and the Fed meeting on December 8–9.
• Check the duration of your bond funds. The longer it is, the more prices react to changes in rate expectations; short Treasury bills carry far less of that risk.
• When choosing where to keep dollar savings, compare the yield on short Treasury bills, net of broker fees and taxes, with your bank's deposit rate.
• Do not build a portfolio around one Fed meeting: market odds change after every release.