Research
October 28, 2026
Monetary Policy
Federal Reserve kept short-term rates unchanged at its October meeting
At its October 27-28 meeting, the Federal Open Market Committee (FOMC) maintained its target range for the federal funds rate at 3.75% to 4.0%, following a rate hike at the previous meeting that marked its first increase since July 2023.
While Federal Reserve officials remain concerned about elevated inflation, they are widely expected to wait until the December 8-9 meeting before considering another rate increase. In the meantime, policymakers will continue to evaluate incoming economic data while reinforcing their commitment to price stability. The timing of the next meeting, which comes after next week's midterm elections, also removes any concerns about the appearance of political influence on monetary policy decisions.
The decision was not unanimous, with Fed Governor Lisa D. Cook and Cleveland Fed President Beth M. Hammack dissenting in favor of a 25-basis-point rate increase.
Beyond inflation concerns, the Federal Reserve pointed to continued strength in the U.S. economy, describing growth as proceeding at a "strong pace" and highlighting solid gains in productivity and capital spending. On the labor market, the Fed noted that job growth has "kept pace with the workforce." Even so, policymakers acknowledged lingering uncertainty, particularly regarding geopolitical developments.
The bottom line for restaurants is that the Federal Reserve remains on track to raise interest rates later this year and likely again early next year as it continues its effort to ease inflationary pressures across the economy.
For the restaurant industry, elevated interest rates continue to increase borrowing costs, potentially slowing expansion plans, renovations, and other capital investments. Higher financing costs can also weigh on franchise development and new unit construction, creating headwinds for industry growth. If rates remain elevated for an extended period, the combination of higher borrowing costs and softer business investment could present additional challenges for restaurants and other hospitality businesses.
Higher interest rates also affect restaurants indirectly through their impact on consumers. As households devote more income to servicing credit card, auto, and mortgage debt, less may be available for discretionary spending. As a result, sustained rate increases could weigh on restaurant traffic and sales growth, particularly if consumers become more cautious in their spending.
While Federal Reserve officials remain concerned about elevated inflation, they are widely expected to wait until the December 8-9 meeting before considering another rate increase. In the meantime, policymakers will continue to evaluate incoming economic data while reinforcing their commitment to price stability. The timing of the next meeting, which comes after next week's midterm elections, also removes any concerns about the appearance of political influence on monetary policy decisions.
The decision was not unanimous, with Fed Governor Lisa D. Cook and Cleveland Fed President Beth M. Hammack dissenting in favor of a 25-basis-point rate increase.
Beyond inflation concerns, the Federal Reserve pointed to continued strength in the U.S. economy, describing growth as proceeding at a "strong pace" and highlighting solid gains in productivity and capital spending. On the labor market, the Fed noted that job growth has "kept pace with the workforce." Even so, policymakers acknowledged lingering uncertainty, particularly regarding geopolitical developments.
The bottom line for restaurants is that the Federal Reserve remains on track to raise interest rates later this year and likely again early next year as it continues its effort to ease inflationary pressures across the economy.
For the restaurant industry, elevated interest rates continue to increase borrowing costs, potentially slowing expansion plans, renovations, and other capital investments. Higher financing costs can also weigh on franchise development and new unit construction, creating headwinds for industry growth. If rates remain elevated for an extended period, the combination of higher borrowing costs and softer business investment could present additional challenges for restaurants and other hospitality businesses.
Higher interest rates also affect restaurants indirectly through their impact on consumers. As households devote more income to servicing credit card, auto, and mortgage debt, less may be available for discretionary spending. As a result, sustained rate increases could weigh on restaurant traffic and sales growth, particularly if consumers become more cautious in their spending.