Updated October 29, 2026. The Federal Reserve and European Central Bank (ECB) kept interest rates unchanged at consecutive meetings on October 28 and 29, leaving currency traders to assess two different inflation challenges. The Fed maintained its federal funds target range at 3.75%–4.00%, while the ECB held its deposit facility rate at 2.50%. Neither decision, by itself, determines where the euro will trade against the U.S. dollar.
The Fed’s decision passed by a 10–2 vote, with both dissenters favoring a rate increase. The ECB emphasized the inflationary and economic damage that higher energy costs could cause. For EUR/USD, the important question is not simply which central bank held rates, but how investors revise expectations for future policy on each side of the Atlantic. Both decisions are documented in the Fed’s October 28 statement and the ECB’s October 29 announcement.
Why Did the Fed Hold Rates at 3.75%–4.00%?
The Federal Open Market Committee left its benchmark target range unchanged after raising it by a quarter percentage point in September. The Fed described U.S. economic activity as expanding strongly, supported by resilient domestic spending, robust capital investment and job gains that have broadly matched labor-force growth. It also said inflation remained elevated and that more information would guide its next decision.
The vote is an important detail. Lisa D. Cook and Beth M. Hammack opposed the October hold because they preferred a 25-basis-point increase. Those two votes establish that the committee was not unanimous; they do not establish that another increase has been scheduled. The Fed’s September decision had raised the target range to its current level by a unanimous vote.
Why Did the ECB Keep Its Deposit Rate at 2.50%?
On October 29, the ECB left its three key policy rates unchanged: the deposit facility at 2.50%, main refinancing operations at 2.65% and marginal lending facility at 2.90%. This was a pause after the Governing Council raised all three rates by 25 basis points in September, as its previous monetary policy decision confirms.
The ECB’s immediate challenge is a prolonged energy-price shock. Higher energy costs can push inflation upward while depressing economic growth, making the trade-off harder for policymakers. The bank said underlying inflation had so far remained broadly stable and wages had not shown a material response, while financing conditions had tightened since the previous meeting. It reiterated its 2% medium-term inflation goal and said it would decide policy meeting by meeting without committing to a specific rate path.
Fed vs. ECB: October 2026 Decisions Compared
| Central bank | October decision | Signal for readers |
|---|---|---|
| Federal Reserve — October 28 | Held the federal funds target range at 3.75%–4.00% | 10–2 vote; two policymakers wanted a 25-basis-point increase; inflation remained elevated. |
| European Central Bank — October 29 | Held deposit rate at 2.50%, refinancing rate at 2.65% and lending facility rate at 2.90% | Rising energy prices threaten both inflation and growth; no pre-announced path for rates. |
These are different monetary policy instruments: the Fed publishes an overnight target range, while the ECB’s deposit facility rate remunerates eligible bank deposits at the central bank. Comparing the headline numbers can provide context, but it is not a complete measure of the interest-rate return available to a currency investor.
What Do the Decisions Mean for EUR/USD?
EUR/USD expresses how many U.S. dollars one euro buys. A higher EUR/USD quote means the euro has strengthened against the dollar; a lower quote means it has weakened. Exchange rates respond not only to today’s policy settings but also to anticipated future rates, bond yields, inflation, growth and changes in risk appetite.
One possible dollar-supportive scenario: if incoming U.S. inflation or employment data cause investors to expect higher U.S. rates for longer, dollar-denominated assets may become relatively more attractive, putting downward pressure on EUR/USD, all else equal. The Fed’s two votes for a hike make that possibility relevant to watch, not certain to occur.
One possible euro-supportive scenario: if traders come to expect the ECB to tighten policy more than previously assumed while the expected Fed path changes little, relative rate expectations could shift toward the euro. However, an energy shock that worsens euro-area growth or raises import costs could offset any support from a more restrictive ECB outlook.
Even a decision described as hawkish or dovish can produce the opposite short-term price response if markets had already anticipated it. A credible EUR/USD analysis therefore distinguishes the actual policy announcement from the expectations embedded in market prices before it was released. Neither central bank’s October statement provides a guaranteed exchange-rate direction.
What Should EUR/USD Traders Watch Next?
- U.S. inflation and labor-market releases: new data may change expectations about the next Fed move, including whether restrictive policy needs to be maintained or strengthened.
- Euro-area inflation and energy prices: persistent energy pressures could lift headline inflation even while weakening demand, complicating the ECB’s choices.
- Relative bond yields and market expectations: changes in forward-looking interest-rate pricing often matter more for FX than a widely expected decision to hold rates.
- Volatility and execution risk: currency markets can reprice quickly around data releases, and leveraged positions can magnify losses as well as gains.
The Fed’s official calendar lists its next scheduled policy meeting for December 8–9, 2026. The ECB’s calendar lists its next monetary policy decision for December 17. Those are dates to monitor, not promises of interest-rate changes.
Can EUR/USD Move Even When Both Central Banks Hold Rates?
Yes. An unchanged policy rate can still be news if the vote, economic assessment or perceived future path differs from investors’ expectations. The Fed’s dissenting votes and the ECB’s concerns about energy costs are precisely the kinds of details that can affect those expectations. Changes in other economic data and geopolitical conditions can also move the pair between central bank meetings.
The bottom line: the Fed and ECB both paused after September rate increases, but for different reasons. The U.S. decision highlighted strong activity, persistent inflation and two votes for tighter policy; the euro-area decision highlighted the competing inflation and growth risks of rising energy costs. For EUR/USD readers, the useful takeaway is to track how the relative outlook evolves—not to treat either rate hold as an automatic buy or sell signal.