Dr. Hamad Kasasbeh

In monetary policy, not every decision means raising or cutting interest rates. Sometimes, keeping rates unchanged is the decision that deserves more attention. That is what happened when the U.S. Federal Reserve held interest rates steady. The decision was widely expected, but its timing made it more interesting, especially during the midterm election season, when the economy is a major part of public debate. This raises a simple question: was the decision mainly economic, or did the political timing also matter?

From an economic point of view, there are good reasons to wait. Interest rates are in a range of 3.75% to 4.00%, while inflation is still above the level the central bank wants. At the same time, the U.S. economy is still growing at a reasonable pace, and the labor market is not showing serious weakness. This puts monetary policy in a difficult position: inflation is still a concern, but the economy does not require an urgent move. The decision to hold rates can therefore be seen as a way to watch the economy before taking another step.

But the timing also matters. The decision came during a sensitive election period, when the cost of living, housing and borrowing are important issues for American families. Interest rates are not just numbers announced by the central bank. They affect mortgage and car payments, credit-card costs and the cost of financing for businesses. In the end, these effects reach spending, investment and jobs. That is why an interest-rate decision can have an economic effect and a political impact at the same time.

There is another cost that should not be overlooked: the cost of servicing U.S. public debt. Higher interest rates do not only affect households and businesses; they also reach the federal budget as the Treasury refinances part of its debt at higher costs. The Congressional Budget Office projects net interest outlays at about $1.0 trillion in 2026, equal to roughly 3.3% of GDP. This does not mean the Fed sets interest rates to reduce the government’s debt bill—that is not its mandate. But it does mean that keeping rates high for longer now carries a clear fiscal cost, making every new rate decision more sensitive.

From this angle, none of the choices was easy. Raising rates would have made borrowing more expensive and could have added pressure on markets and the economy. Cutting rates, on the other hand, could have looked too early while inflation remains a concern. Holding rates steady therefore appears to be the lower-risk option for now: no extra tightening, no early move toward easier policy, and more time to see what the next data show. This is one way to read the decision, not a claim about what happened inside the Fed.

This is where economic reasons meet political timing. There are clear economic arguments for keeping rates unchanged, but doing so during an election season gives the decision another meaning that cannot be ignored. This does not prove that politics made the decision, just as economic reasons do not mean timing had no role at all. A better question may be whether the timing helped support an option that was already acceptable on economic grounds. It is a fair question, but one decision alone cannot answer it.
For this reason, the next Fed meeting may tell us more. If monetary policy changes after the elections without a clear change in inflation, growth or the labor market, questions about timing will become stronger. If the Fed stays on the same path because the economic data still support it, the economic explanation will become clearer. The next data and decisions may therefore tell us more than trying to guess the reasons behind one meeting.

In the end, the issue is not simply economics or politics. There are clear economic reasons for holding rates steady, but the political timing also deserves attention. That does not make the decision political, and it is too early to reach a firm conclusion. The next step may be more important than the current one because it could show whether the hold was part of a continuing economic path or whether timing had a bigger role. Until then, the job of analysis is to read what we know, not to assume what we do not.