Why the Fed Paused On Another Rate Rise

Plus: Wendy's Got Beef With $1.4 Billion Go-Private Offer

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Cheddar's Big Business This Week
October 29, 2026

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With inflation still above target, what does the Federal Reserve’s decision this week to hold the federal funds rate steady at 3.75% to 4% mean for households and businesses? Big Business This Week spoke with economist Dr. Rebecca Homkes, a strategy adviser and a lecturer at the London Business School, about supply shocks, the inflation numbers and why consumers need clearer guidance.

Why was holding interest rates steady the right decision?

I think the Fed made the right move of not moving. There is a risk of raising too quickly, too much. Most of the inflation we're seeing is coming from something called supply shock, not demand. When we're getting inflation from supply shock, like we're getting from the war in the Middle East, raising energy prices and tariff pass-through, interest rates aren't that effective of a tool, and they can go the wrong way. So if you raise interest rates too much into supply shock, you have the risk of weakening an already weakened economy.

What makes this situation particularly difficult for the Fed?

Interest rates are a really crude tool for a complicated world. They are a very blunt instrument for a lot of overlapping factors, and the supply shocks being the reason for the inflation are the biggest reason the Fed is not moving interest rates more quickly. Supply shocks are not uncommon. What is uncommon is how many of them we're [now] getting in a year versus a couple every other year. Now we're getting multiple supply shocks every year. That's what makes the Fed’s job harder.

Let’s talk about numbers. The GDP estimate just came out today at an annualized 3.4% for the third quarter. Inflation, using the personal consumption expenditures measure, was 0.5 percent in September from August, and 3.6% from a year earlier. Core PCE, which strips out fast-rising energy and food costs, jumped 0.3% from August for an year-over-year jump of 3.1%. What does that mean for consumers?

GDP at 3.4% is incredibly hot. A decent amount of that is driven by consumer business investment, which is mostly the data center fill-out. What I'll be most closely looking at later is consumer spending: We want consumer spending to be continuing at a relatively robust pace, because GDP growth is driven largely by investment and government spending right now, and consumer spending is flat. That is a worrying sign to the economy, even though the headline number is good. The PCE number that just came in, that's pretty tame. Okay. So that does actually justify a little bit what the Fed did yesterday.The Fed made the right move of not moving. There is a risk of raising too quickly, too much. 

Could rates rise in December?

I think it's quite likely that we will see another hike in December, just given inflation data is still above three, even on the core level.

What’s causing this inflation, and how does that affect rates?

Most of the inflation we're seeing is coming from something called supply shock, not demand. Why we have inflation really matters to what the Fed does. If we're getting inflation because the economy is really hot, consumers are spending a lot, and there's a bunch of money and therefore fewer goods, then the Fed needs to raise interest rates to cool that spending down. When we're getting inflation from supply shock, like we're getting from the war in the Middle East, rising energy prices, and tariff pass-through, interest rates aren't that effective of a tool, and they can go the wrong way.

So if you raise interest rates too much in a supply shock, you risk weakening an already weakened economy. Now, the Fed could get away with that argument several months ago, but we actually have decent data within the last three months that we're not seeing a weak economy. So they could actually use interest rates.

Remember, interest rates are a really crude tool for a complicated world. They are a very blunt instrument for a lot of overlapping factors, and the supply shocks being the reason for the inflation are the biggest reason the Fed is not moving interest rates more quickly.

Why is the Fed distinguishing between headline and core inflation? 

So, headline is all of those baskets [of things consumers spend money on]. And then we have core, which takes out food and energy. The reason the Fed looks at core is that food and energy are very volatile and are more subject to monthly swings. But a consumer doesn’t have the luxury of deciding what’s in their basket.

But energy prices are not volatile any more, the Iran War has made them higher for the foreseeable future.

So there is a bit of a disconnect between what monetary policy looks at, versus what consumers are facing on a day-to-day basis.

Why do households feel insecure despite healthy headline economic numbers?

Even if they still have a job, there's a fear they might not have a job, even if they can afford groceries, it's very difficult to go to three different stores to kind of complete your same basket, to keep costs where you need them to be. Or say you may want to leave your job, but you're concerned you can't find another one. For consumers, living day-to-day in this chaos is a cost. It's a real tax that consumers pay, and we're seeing that reflected in the confidence numbers.

This year’s economics Nobel went to Robert Hall and Michael Woodford, who talked about how communicating economic goals keeps the actors in an economy working toward those goals. That seems counter to Fed Chair Warsh’s decision not to give forward guidance to consumers and markets. What does their work tell us about the guidance the Fed should provide?

Hall and Woodford's research actually spoke about the necessity of guidance. The need to guide consumers and businesses to where the market is going so they can make better decisions in the near term, just as you were saying. No one is asking for [Warsh] to give us predictions, but guidance can guide, like the word says, consumers and small businesses to make better decisions in the day-to-day, knowing a bit about where the future might take them, and I think that we can learn from what Hall and Woodford were saying, especially in our current shaky time.

What’s coming down the pipe? 

For now, consumers are still spending. Consumer spending is still increasing, even while consumer confidence is still at a historic low, and at some point, this will come to a head. Now, there is a way where if we eventually flatten the effects of the war in the Middle East and the tariff expectations are firmly baked in and we have clarity on future tariffs, things could settle. And we can see consumer spending rise by up to 5% as well [as AI spending slows]. Right now, the economy is shaky, but it’s still robust. But if those things don't happen, if big supply shocks continue, and we have a third or a fourth over the next couple of months or into next year, then we could see a very shaky economy become stressed.

(This interview has been edited and condensed for clarity and brevity)

—Peter S. Green

Big Businesses mentioned this week:

This week, big business!

The Usual Suspects

  • Wendy’s got beef:  Beleaguered beefburger chain Wendy’s $WEN ( ▲ 1.34% ) has been offered $1.4 billion to go private from investor Nelson Peltz's Trian Fund Management. The price is a 20% premium to the previous day’s close, and shares rose just 15% on the news, suggesting investors wonder whether Peltz, who’s working with Wendy’s franchisee Flynn Group (340 Wendy’s locations) and several other investors, can complete the buyout. It’s not exactly a whopper of a deal, and Wendy’s share price is down almost 70% in the past five years. President Trump’s plan to cut tariffs on 100,000 metric tons a month of beef scraps in an effort to keep down burger prices hasn’t helped. Imports appear to have stalled, with the customs data showing only 37,486 tons entered the country under the special waiver in September. Ground beef prices dropped a mere 2% to $6.79 a pound in September from August. Beef was $5.55 a pound when Trump took office in 2025.

  • Tower of Mammon: JPMorgan Chase $JPM ( ▲ 1.25% ) CEO Jamie Dimon’s newest toy, a $6 billion office tower on New York City’s Park Avenue, cost a lot more than the $2-$3 billion Dimon originally told shareholders he planned to spend, the Wall Street Journal reports. For the 10,000 employees who are expected to fill  270 Park Avenue's 2.5 million square feet, that’s about $600,000 per desk, and they will need to generate additional profits of about $42,000 a year per employee to cover the cost of that capital investment. That kind of productivity gain is unlikely to occur, so how does the building make money? By cutting expensive leases that make other landlords rich, by owning an asset that will likely grow in value, and most of all by getting you and me to give Chase tax breaks for the depreciation of the building and its tech heavy infrastructure. 

  • Is DraftKings illegally turning losers into Double Losers? U.S. senators and regulators from New York, Massachusetts, Michigan and several other states have been asking questions of DraftKings $DKNG ( ▲ 1.72% ) and other online gambling and prediction market platforms including FanDuel $FLUT ( ▲ 0.89% ) , BetMGM, Caesars, Fanatics $FANAZZX ( ▲ 1.95% ) , Kalshi $KALSZZX ( ▲ 0.53% ) and Polymarket $PLYRZZX ( ▼ 0.04% ) . They want to know how the platforms  use machine learning and AI to pressure gamblers into spending ever more money on the betting platform. The investigations follow a New York Times series last month at how DraftKings uses a form of AI to find the customers most likely to keep making bad bets if plied with promotions, a virtual version of the old extra-strong martini at a Vegas casino. “Sportsbooks are supercharging addiction, using A.I. to target users and keep them hooked on gambling,” Sen. Richard Blumenthal, D-CT,  told the New York Times. DraftKings CEO Jason Robins denies targeting problem gamblers, and told CNBC parents should talk to their children about gambling, and said the site was offering problem gamblers a chance to block themselves from the site. Shares in DraftKings are down 41% this year.

  • China’s car crash economy: Chinese-made EVs may be sparking price wars abroad, but at home, new car sales are collapsing, down 22% through September from a  year earlier, with total sales for 2026 expected to reach only 18.5 million vehicles, the fewest sold since 2014. The biggest problem? Too many car makers, and most of them got big investments from the government. It wouldn't matter if they could sell their production abroad, but foreign countries that from the U.S. to the E.U. that produce their own cars are putting up tariff barriers. Also to blame are China's shrinking population, excellent mass transit, and a government-backed push for robotaxis. China’s car sales plunge has slapped foreign carmakers who sell there, including Volvo which is owned by China’s Zhejiang Geely Holding Group. Volvo’s takeaway: With everything that’s made at home, Premium European cars have no more market in China. That's part of why Audi $AUDVF ( ▼ 7.62% ) has just announced its first ever U.S. factory, a $4 billion plant in Macon, Georgia set to employ 4,500 people. The other part is to avoid the tariffs that have cooled U.S. sales and profits. 

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Tech Trillions

  • Can You Google “12% Share Dip?” It turns out teaching a search engine to talk like a friendly genius isn’t great for business when it forgets to show you ads. Alphabet $GOOGL ( ▼ 12.64% ) shares took a historic plunge on Thursday—vaporizing almost half a trillion dollars in market value—after revealing that its shiny new AI features are eating its core moneymaker alive. For decades, Google made billions off users frantically clicking through links. Enter "AI mode," which politely gives you conversational answers directly at the top of the screen so you never have to click an ad again. Google’s Chief Business Officer, Philipp Schindler, practically admitted the self-inflicted wound, acknowledging that "AI mode" queries led directly to "lower monetization." That’s tech speak for automated corporate cannibalism. Quarterly AI capital expenditures also ballooned past $50 billion, pulling free cash flow down to minus $9.1 billion. To make matters worse, competitors are showing how to spend responsibly. Dec Mullarkey, managing director at SLC Management, told the FT: “Microsoft $MSFT ( ▼ 0.16% )  is a standout on cash discipline, while delivering on growth. Google fell short and cash flow is expected to be a drag through next year.” So, while CEO Sundar Pichai touts shiny new models like Argon and Carbon, investors are asking a much simpler query: when does spending $205 billion a year on AI start paying the bills?

  • Mag 7, Vaya con dios: That’s it for the tech stocks known as the Magnificent Seven: For years they all marched upward more or less together, rising more than 3.6 times in the last four years. But now, the paths are diverging, and the seven are no longer moving as a team. Blame it on AI: “All have different exposures to AI,” D.A. Davidson analyst Gil Luria told CNBC. “This requires a much more granular approach to which of the largest mega-caps an investor wants to own.” The Roundhill Magnificent Seven ETF $MAGS ( ▼ 2.15% ) is up 7% this year, while the S&P 500 is up 12%. Tesla $TSLA ( ▼ 0.23% ) and Meta $META ( ▲ 2.47% ) are the only two members to decline in 2026, while Nvidia $NVDA ( ▼ 0.83% ) and Apple $AAPL ( ▲ 1.48% ) are the only ones outperforming the S&P. Other Mag7 members are Microsoft $MSFT ( ▼ 0.16% ) , Alphabet $GOOG ( ▼ 12.51% ) , and Amazon $AMZN ( ▼ 4.18% ) . But don’t weep for them. The Mag7 was never going to be a proxy for the global economy. As the unnamed village elder said to Yul Brynner and Steve McQueen when they prepare to ride out of town at the end of the 1960 film version of the Magnificent Seven, “You are like the wind, blowing over the land and passing on.” 

  • That Great Big Cash-Sucking Sound: It’s Meta $META ( ▲ 2.47% ) and Space X $SPCX ( ▼ 0.92% )  announcing plans to raise some $62.5 billion more (and maybe another $60 billion for Meta) to fund the chips and gizmos they need to win the AI revolution. And the pressure is on. Anthropic $ANTHZZX ( ▲ 0.23% ) and Open AI $OPEAZZX ( ▲ 1.33% ) are planning massive IPOs in the next year, and SpaceX took a lot of liquidity out of the market with its IPO last month. As Meta chief Mark Zuckerberg noted in a recent SEC filing, “It would be prudent for the Company to [fund its expansion] before even more companies have absorbed available capital in the market.”

  • Eyeball Wars: When you’ve got it, everyone else wants to copy you. Especially if you are Google parent Alphabet’s $GOOG ( ▼ 12.51% ) YouTube. Last month's Nielsen ratings showed YouTube had the largest audience in the U.S. That’s got social media platforms now moving into longform video: Meta’s $META ( ▲ 2.47% ) Instagram is testing 90-minute videos they are calling features, that would dump the selfie format for horizontal videos that could run as episodes of, basically, a series. What’s it all mean? Possibly new studios coming from Meta, X, Spotify $SPOT ( ▲ 3.24% ) and other social platforms, and a new revenue model that would follow YouTube’s blueprint: Distribution is free, and creators negotiate their own sponsorship deals while sharing ad revenue with the platforms. Does anyone remember barter syndication?

  • NVIDIA boss caught in honey trap?! In what reads like a high-tech spy thriller, Nvidia $NVDA ( ▼ 0.83% ) Chief Executive Jensen Huang reportedly found himself targeted in a covert Chinese intelligence operation. U.S. spy agencies concluded that Alice Huang (also known as Huang Le), an executive at Singapore-based data center firm Megaspeed, was acting as a Chinese intelligence asset funneling information to Beijing. The pair were spotted drinking whiskey in Taipei and leaving business dinners together, setting off alarm bells at the White House, the New York Times reports. When President Donald Trump was briefed on the intelligence findings roughly a year ago, he chose not to take any action. Company spokesman John Rizzo told the Times that “Jensen’s interactions with Ms. Huang are not unusual or unexpected” because “meetings with customers are part of a C.E.O.’s job,” adding that clients like Megaspeed receive “zero information relevant to national security.” Meanwhile, Megaspeed said its current leadership takes the matter “extremely seriously and is committed to getting to the facts,” while Chinese Embassy spokesman Liu Chang dismissed the allegations as “groundless smears and slanders.”

  • What’s a New-Gen Tech titan worth? Anthropic $ANTHZZX ( ▲ 0.23% ) officially released its already-leaked IPO prospectus this week, revealing it’s seeking to raise $100 billion, valuing the company at between $1.4 and $2 trillion. That’s huge for a company that’s barely five years old. Where does that valuation come from? Partly from a market the company guesstimates of a total knowledge worker market of at $40 trillion a year. That’s more than the $32.6 trillion GDP of the U.S., and is way more (40.4% more) than SpaceX’s own $28.5 trillion guesstimate.) The jury is still out on whether buying Anthropic shares at the IPO will be a good deal. In the first half of 2026, the company lost $80.7 billion on $16.3 billion in revenue, (much of that due to accounting issues) a harsh illustration of the risk of spending gobsmacking sums on chips and data centers before there are enough clients to pay the bills. But if you bought into Anthropic as a private investor, there are some pretty nice rewards in the offing: At a $1.5 trillion valuation, investment fund Spark Capital’s $777 million investment would become $10.9 billion. Anthropic’s IPO success is also a big deal for the AI industry, a test of whether investors believe there’s a real market for AI, and whether the rest of the AI ecosystem —chipmakers, power producers, AI startups—will survive. Meanwhile, the prospectus spends 94 pages describing AI-related risks, declaring that it could lose control of AI systems, and notes a serious problem: “Because our models may behave in ways that no user or developer intended, claims arising from such actions could result in substantial liability. Our insurance policies also may not provide sufficient coverage.” As then-Defense Sec. Donald Rumsfeld so perspicaciously noted before he invaded Iraq in 2003,  there are the known knowns, known unknowns, and the unknown unknowns, “the ones we don't know we don't know."

  • That great big layoff sound: Microsoft $MSFT ( ▼ 0.16% ) says it's offering buyouts to some 60,000 employees, a little more than a quarter of its 223,000-person workforce, as it slims its payrolls to fund massive investments in AI. It’s expected to spend more than a trillion dollars on capex over the next five years, much of that on AI. Clippy’s last buyout was taken up by 30% of those who got theoffer. Microsoft shares were down 5% in midday trading on Thursday, but they’re up more than 10% this year.

The Short Stack

  • Buckle Up: After a Georgia man died when he was thrown from a  roller coaster at a Six Flags $FUN ( ▲ 1.86% ) amusement Park near Atlanta, the company is adding seatbelts to many of its rollercoasters. The accident put a dent in Six Flags efforts to rebuild its fortunes amid sagging attendance and rising costs. SHares in Six Flags jumped nearly a dollar to $7.75 after the announcement. Six Flags stock has dropped 83% in the past five years.

  • Homeowners get stiff-ARMed: Adjustable rate mortgages (ARMs) are back and homeowners are getting stiffed. While they still represent only 5% of all mortgages, way down from the 30%+ that helped trigger the 2008 financial crisis, applications for ARMs are up—to 10.5% of all applications earlier this month, from 6% at the beginning of the year. The attraction is an entry rate that’s well below market. But the reset to market rates often comes before homeowners can refinance at lower rates or sell and move, the Wall Street Journal reports.

Trumplandia

  • What the Jared? “Explosive” is an oft-overused word when talking about investigative journalism, but a new book by Matthew Cole, excerpted in Vanity Fair and The New Republic paints a jarring picture of the extent to which the Trump family business directed U.S. foreign policy to help line its own pockets. Jared Kushner’s spokesman denies any wrongdoing. But we all knew that after Trump 45, first son-in-law Mr. Kushner’s Affinity Partners got handed a few billion dollars by Saudi Arabia to run an investment fund. Now we learn from the reporting that billions more dollars passed into Kushner's bank accounts as he reportedly directed U.S. foreign policy to serve the interests of Middle East potentates. Eager to keep the Trump Administration aligned with their own goals, UAE and Saudi rulers discussed putting $10 billion into Trump’s signature first-term project to  build a wall along the border with Mexico. While that project failed, a deal to pay Israel to help defend the UAE from a potential attack from Iran went through Kushner, who transferred funds from the Emirates to Israel through an account he controlled, Cole reports. He also shows Kushner made a small fortune helping to oust Trump’s first secretary of state, former ExxonMobil $XOM ( ▲ 0.59% ) CEO Rex Tillerson, who resisted a Saudi and UAE effort to sanction and blockade rival Qatar over its support for Islamists and its close ties to Iran. Kushner quietly pushed Trump to dump Tillerson, and Cole reports that after the firing, $50 million was transferred to a Cyprus bank account controlled by Kushner. Again, Jared Kushner’s spokesman denies any wrongdoing on behalf of his boss. Kushner himself also took to Twitter to deny the reporting in strong terms, and his lawyers have promised “more to come.”

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Peter S. Green is a veteran reporter and editor who has spent more than two decades covering business and finance from Eastern Europe to New York City, and has worked for Bloomberg News, The New York Post, The New York Times and The Messenger. He lives in New York City and is always looking for the next big story. Email him here.