October 30, 2026
All eyes were once again on the Fed this week, and the Federal Reserve held its policy rate at 3.75% to 4.00% on Wednesday following the October 27-28 FOMC meeting. The decision was not unanimous as Governor Lisa Cook and Cleveland Fed President Beth Hammack dissented in favor of a quarter-point increase. It was Cook’s first dissent since joining the Board in 2022. The statement upgraded its description of growth to a strong pace from a solid one and said inflation remains elevated. Chair Kevin Warsh provided no forward guidance about the December meeting but did say financial conditions had tightened for some businesses and households. Neither the statement nor the Chair signaled the timing of any further increase.
Economic growth expanded in the third quarter as GDP grew at a 3.4% annualized pace in the advance estimate, ahead of the 3.2% consensus, while nonresidential fixed investment—a proxy for AI infrastructure development—and consumer spending were leading component. Meanwhile, inflation ticked higher. The core personal consumption expenditures price index, which excludes food and energy, rose 0.3% in September and 3.1% from a year earlier, up from 3.0% in August. The overall index rose 0.5% on the month and 3.6% from a year earlier. All four readings matched forecasts. The Conference Board’s consumer confidence reading jumped to 91.7 from 84.2, it’s highest since June. Strong spending alongside firmer core inflation suggests demand, not only energy, is lifting prices, keeping the path of short-term rates tilted higher.
Home prices showed gains in August with the S&P Cotality Case-Shiller 20 City Composite Index, reporting a 2.65% annual increase. New home sales slipped 0.6% in September, and the 30-year mortgage rate eased to 7.24%.
Yields fell despite the dissents and strong GDP, as in-line price data and a technology sell-off drew money into bonds. Alphabet fell more than 12% Thursday, its worst day on record, on slower search growth and negative free cash flow. As of this writing, the 2-year yield is 4.60%, down 8 basis points on the week, and the 10-year is 4.93%, down 6 basis points. The S&P 500 is at 7,627.48, up 0.05% and lower for October, while the equal-weight index added 1.60% through Thursday. West Texas Intermediate crude climbed 0.89% to $104.19 a barrel, and gold fell 2.26% to $3,905.64 an ounce. The 2-year to 10-year spread widened to 33 basis points from 31, paying slightly more to extend maturities.
The Chandler team expects one more quarter-point increase this year at the December 8-9 FOMC meeting, followed by an additional rate hike in the first quarter of 2027. The dissents, solid output and firmer core inflation argue for it, though slower wage gains and falling yields leave the case open. October payrolls on November 6 are the next test, and economists surveyed expect a gain of 62,000. A firm report would strengthen the case for December. The Chandler team continues to manage client portfolios with an emphasis on high credit quality, ample liquidity, and disciplined duration management.
Next Week: ISM Manufacturing and Services, JOLTS, S&P Global PMI, Nonfarm Payrolls, University of Michigan Consumer Sentiment, Labor Force Participation Rate
Written by Karl Otto Meng, CFA, Portfolio Strategist