unchanged

Rates will remain 3.75-4 percent even as inflation continues to rise.

The United States Federal Reserve is set to hold interest rates steady in its final monetary policy decision before the US midterm elections.

The central bank will maintain rates at 3.75-4 percent, following a 10-2 vote, in line with expectations.

CME FedWatch, which tracks the likelihood of monetary policy decisions, indicated that there was more than a 90 percent chance rates would remain unchanged.

“Economic activity is expanding at a strong pace,” the Fed said in its press release announcing the decision on Wednesday. “While uncertainty remains elevated owing, in part, to geopolitical developments, domestic spending has been resilient. Productivity growth is strong, and capital investment is robust. Job gains have kept pace with the workforce, and the unemployment rate has changed little.”

The Fed noted how inflation continues to rise.

It also added, “The accumulation of more information will help the Committee determine the policy stance appropriate to ensure a timely return of inflation to the Committee’s 2 percent goal.”

The most recent Consumer Price Index (CPI) report showed the annual inflation rate increasing to 3.7 percent in September, up from 3.4 percent in August, with energy prices largely accounting for the monthly surge.

There were signs earlier this month that the central bank would maintain benchmark interest rates, with the Fed’s chair for supervision, Michelle Bowman, advocating a “wait and see” approach.

“I don’t feel any urgency for taking further action at this point,” she said at this month’s International Monetary Fund-World Bank meetings in Bangkok, Thailand. “We really need to take some time and understand how things will evolve.”

The decision comes before Thursday’s release of the Personal Consumption Expenditures (PCE) Price Index report, which is used by the central bank to assess inflation and inform its decisions.

Today’s Fed announcement follows an interest-rate hike rise last month, amid surging inflation – the first increase by the central bank since July 2023. The move drew criticism from US President Donald Trump, who has repeatedly pressed the Fed to cut rates since taking office. At the time, he wrote on Truth Social that “interest rates in the United States should be 1% or less.”

The Fed’s next monetary policy meeting is scheduled for December 8-9, when it will give its final rate decision of the year.

Current forecasts point to a quarter-point interest rate increase.

They hit you hardest if your income is close to one of the tax thresholds, but anyone who gets a pay rise is affected, as long as you earn enough to pay tax. Only people earning under £12,570 – the personal allowance threshold – pay no income tax.

By 2031 an extra 6.8 million people will be paying tax who wouldn’t have if the personal allowance had not been frozen, the OBR calculates.

The state pension is currently just below the personal allowance threshold, and pensioners looked set to be drawn into paying tax from next April, when the basic state pension rises to £13,036.

However, the chancellor is putting in place a new separate Pension Tax Allowance, which will ensure that low-income pensioners, with income up to the value of the full new state pension, will not pay income tax.

The personal allowance threshold is set for the whole UK, so people in Scotland will also be affected, although other tax bands there vary, external.

National Insurance Contributions (Nics) are levied according to the same thresholds.