As inflation climbs, central bankers will wait before next hike.

U.S. Federal Reserve Chairman Kevin Warsh speaks at a global summit in Bangkok, Thailand, on Oct. 16. Dhitaraht Dhanarahtsombat — AP.

BY CHRISTOPHER RUBAGER | THE ASSOCIATED PRESS

The Federal Reserve kept its key rate unchanged Wednesday at about 3.9% despite stubbornly high inflation, as Chairman Kevin Warsh suggested its policies are already showing signs of having an impact.

“Inflation remains elevated,” the Fed said in a statement released after its two-day policy meeting. Holding off on an increase will allow “the accumulation of more information” that will help determine what policy the Fed should pursue “to ensure a timely return of inflation” to the central bank’s 2% inflation target, the statement said.

The Fed raised its benchmark rate last month for the first time in three years, defying President Donald Trump’s demands for rate cuts, in an effort to cool inflation more quickly. The Fed is tasked by Congress to combat inflation, and it does so by lifting rates to slow borrowing and spending and reduce price increases.

Michael Reynolds, vice president of investment strategy at Glenmede, a wealth management firm, said the statement suggested the central bank will likely hike its key rate by a quarter-point at its next meeting Dec. 8-9. Wall Street investors now see the odds of an increase then at nearly 85%, according to CME Fedwatch.

“It’s likely going to take one more (hike) from the Fed to get interest rates into restrictive territory,” where they can slow inflation, he said.

The Fed’s decision comes just six days before a midterm election that has focused heavily on concerns around the cost of living and affordability. Consumers have generally soured on an economy weighed down by more expensive gas, groceries, and clothing, among other items. Warsh denied the election played a part in the Fed’s staying pat.

“Politics played no role in the decision,” he said at a news conference following the announcement. “I just spent two days with my colleagues upstairs. I didn’t hear an utterance about politics.”

Warsh said the “overwhelming consensus” among Fed officials is what they’ve done “is starting to work some,” noting that credit conditions “tightened for some businesses and households.”

He said specifically that as large tech firms rely more on borrowing to build data centers, higher rates will have a greater ability to cool that investment.

“Do interest rates matter?” Warsh asked. “I believe they do, and I don’t think they’re divorced from the rest of the economy.”

Parts of the economy are being hit by higher rates, which were lifted by market forces, even before the Fed hiked last month. The average 30-year mortgage rate reached a three-year high of 7.4% earlier this month, though it has since slipped a bit. Higher mortgage rates have made buying a home unaffordable for 5 million more Americans since the beginning of the year, according to Oxford Economics, a consulting firm. Over time, Fed rate hikes can make mortgages, auto loans, and credit card borrowing more expensive, adding to Americans’ sense that things like homes and cars are getting pricier.

Two Fed officials dissented from Wednesday’s decision, with Fed governor Lisa Cook and Federal Reserve Bank of Cleveland President Beth Hammack voting in favor of hiking rates by a quarter point.

Warsh also said the central bank will switch to an adjusted meeting schedule next year, with plans to hold rate-setting votes at seven out of eight meetings.

The Fed will use one of those eight meetings in 2027 to discuss “broad monetary policy strategy” and won’t vote on its benchmark interest rate or release a statement following that gathering. In 2028, two of the eight meetings will be reserved for discussion not interest rate changes, he said.