Six days

Six days. That's all that separates the next Fed decision from the midterms.

On October 28, the FOMC announces its rate call, six days before Election Day (Nov 3).

And if you're wondering whether the Fed would really move that close to an election: it already did this year. On September 16, it hiked 25 bps to 3.75–4.00% — its first increase in three years — with projections pointing to another by year-end.

So what happens when the Fed hikes right before midterms? History gives us exactly two clean examples:

1978 — With oil-shock inflation surging, the Fed raised rates weeks before the midterms. It wasn't enough: CPI hit 9% that year, 13%+ by 1980, forcing the Volcker shock and back-to-back recessions.

2022 — The Fed hiked 75 bps on November 2, six days before the midterms. Powell's message: politics plays no role in the decision. Markets dipped on "higher for longer," then rallied days later on a soft CPI print. The Fed downshifted within a month — and inflation fell from 7.1% to 3.1% over the next year without the deep recession many forecast.

And the counterexample: December 2018. That hike came a month *after* the midterms, but the market tantrum it triggered — and the "Powell pivot" that followed — is the cautionary tale every FOMC member knows.

The pattern across all three: the near-term market reaction is noise. The real verdict comes later — on whether inflation actually breaks.

Three things to watch before October 28:

1. September CPI (mid-October) — the biggest single variable

2. How officials frame "one more increase by year-end": October or December?

3. Whether anyone blinks first on the optics

Central bank independence isn't tested in calm times. It's tested six days before an election. But the wildcard is not at the Fed, but at the White House. Trump will likely lose majority in the House, and perhaps even the Senate in the midterms. Will he blame the Fed? more importantly, look at he chart below, will this hiking cycle pop the bubble? A 10 year yield above 5.5% might signal a turning point for P/E ratios.

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