Key takeaways
- The Fed sets one rate directly: the federal funds target range, held at 3-3/4 to 4 percent on Oct. 28, 2026.
- Prime, posted by banks, now equals the top of that range plus 3 points (7.00% on Nov. 5, 2026); a variable card APR adds a lender margin on top.
- The 30-year mortgage average (7.18%) is benchmarked to the 10-year Treasury (4.84%) and inflation expectations, not to FOMC meeting dates.
On Oct. 28, 2026, the Federal Reserve left its benchmark rate unchanged. On Nov. 5, the bank prime rate stood at 7.00%, the same level it held the day before that meeting. Freddie Mac’s weekly average for a 30-year fixed mortgage did move, slipping from 7.24% to 7.18%. Both rates respond to inflation, yet one held still while the other shifted. The split comes from two separate routes. One runs through decisions the Fed makes about inflation. The other runs through what lenders and bond investors expect prices to do over the life of a loan.
Quick answer
Inflation moves interest rates along two paths. When inflation runs above the 2 percent goal set by the Federal Reserve, the Fed can raise the one rate it sets directly: the target range for the federal funds rate, held at 3-3/4 to 4 percent on Oct. 28, 2026. The prime rate, and card APRs built on it, follow that range. Separately, lenders demand more when they expect higher inflation, so 30-year mortgage rates track the 10-year Treasury yield, not the Fed.
Which rates follow the Fed, and which don’t
The rates a household meets do not answer to the same signal. Some are pegged to a Fed decision; others are priced by markets or by each bank.
| Rate | What it is tied to | When it moves | Where to check it |
|---|---|---|---|
| Federal funds rate | A target range set by the FOMC | At an FOMC decision | FOMC statements; Fed H.15 |
| Prime rate | Now the range top plus 3 points | When the target range changes | Fed H.15; FRED |
| Variable card APR, HELOC | An index, often prime, plus the lender’s margin | When the index rises; no official day count | Cardholder agreement; CFPB |
| Savings and CDs | Each bank’s own pricing | Varies by bank | FDIC national rates |
| 30-year fixed mortgage | The 10-year Treasury yield plus a spread | With bond markets, not on a Fed schedule | Freddie Mac PMMS; Fed H.15 |
Relationships as described by the Federal Reserve, CFPB, FDIC, St. Louis Fed and Freddie Mac; sources read Nov. 7, 2026.
What the Fed sets when inflation runs above 2 percent
The Fed’s goal is inflation of 2 percent over the longer run, measured by the annual change in the price index for personal consumption expenditures (PCE). That is not the Consumer Price Index (CPI), the monthly measure from the Bureau of Labor Statistics that most headlines quote. The Fed’s FAQ on the 2 percent goal gives the reason for aiming low and steady. When households and businesses can expect inflation to stay low and stable, they can make sound decisions about saving, borrowing and investment.
When inflation runs above that goal, the Fed’s main lever is a single overnight rate. The federal funds rate is the interest rate banks pay to borrow reserve balances overnight. The Federal Open Market Committee (FOMC), the Fed’s rate-setting body, sets a target range for it. The Fed steers the market rate toward that range by adjusting the interest it pays on reserve balances that banks keep at the Fed. Target changes are typically matched by changes in that rate, giving the funds rate an incentive to settle at a level consistent with the target.
At its Oct. 28, 2026 meeting, the FOMC voted 10–2 to keep the range at 3-3/4 to 4 percent. Its statement said “Inflation remains elevated” and referred to returning inflation to the committee’s 2 percent goal. Lisa D. Cook and Beth M. Hammack voted against the decision. The effective federal funds rate was 3.88% on Nov. 5, inside the target range.
How higher rates are supposed to bring prices down
The Fed’s link to prices is indirect. Its explainer on monetary policy describes a route that runs through demand. Policy works by spurring or restraining overall demand for goods and services. Tightening raises interest rates to restrain demand, and when demand slows, inflation tends to decline. Short-term market rates, such as those on Treasury bills and commercial paper, typically move closely with the federal funds rate.
The Fed’s FAQ on inflation and employment lays out the same chain, starting from a rate cut. When interest rates go down, borrowing becomes cheaper, and households are more willing to buy goods and services. Stronger demand may push wages and other costs higher, and that influences inflation. A rate increase works in the opposite direction: borrowing costs more, demand eases, and so does the pressure on wages and prices. The monetary policy explainer adds that these effects are not immediate.
Inflation lifts rates even when the Fed holds still
The second route needs no Fed decision at all. A lender repaid a year from now gets dollars that buy less if prices have risen in between. To come out ahead, the lender needs a rate that covers expected inflation and still leaves a real return. The standard approximation puts it simply: the nominal rate, the one quoted on a loan or account, roughly equals the real rate plus expected inflation. Rearranged, the real rate is about the nominal rate minus inflation.
That inflation premium shows up in what lenders and bond investors demand, as the mortgage figures below show. Savers are on the receiving end, and their rates follow no such rule. Each bank sets its own deposit rates, and no fixed formula links them to the fed funds range or to the CPI.
Official averages show how that arithmetic looks for savers. For example, take the FDIC’s national average savings rate of 0.38%, as of Oct. 19, 2026. Set it against the CPI’s 3.7% rise over the 12 months ending September 2026. The approximate real return is about -3.3 percentage points. The national average 12-month CD, at 1.76%, comes out at -1.94 points. On those averages, a balance earned interest and still lost buying power.
That example comes with caveats. It uses past CPI inflation as a stand-in for expected inflation, while lenders price on what they expect rather than what already happened. CPI is also not the Fed’s own PCE gauge. And the FDIC figures are averages across all insured banks, not the best rates on offer. If you hold savings, your own account’s rate is the number to set against inflation.
The prime rate: the direct line to card APRs
The prime rate is the rate posted by a majority of the top 25 insured U.S.-chartered commercial banks, according to the Fed’s H.15 release. Banks post it themselves, yet the current figure lines up with the Fed’s range. The top of the target range is 4 percent, and 4 plus 3 equals the 7.00% prime rate reported for Nov. 5, 2026.
A variable card APR stacks two parts: an index, often prime, and a margin that each lender sets. When the Fed raises its range and prime follows, the index part of that sum rises. Home equity lines of credit (HELOCs) with variable rates often use prime as their index in the same way.
A CFPB consumer page confirms the mechanism. A card issuer can raise the rate on an existing balance when the rate is variable and the index it is tied to, such as the U.S. Prime Rate, has increased. The CFPB page does not say how many days or billing cycles pass before the higher APR applies, and we found no official source that does. If you carry a balance, the cardholder agreement shows which index and margin apply to your account.
Mortgage rates answer to the bond market
The Fed does not set mortgage rates. A 30-year fixed loan runs far longer than an overnight bank loan, so it is priced on expectations over that whole span. The Fed’s explainer makes the general point. Rates on longer-term loans relate to expectations of how policy and the economy will evolve over the life of the loan, not just to the current federal funds rate.
A St. Louis Fed explainer published Oct. 1, 2026 names the benchmark. The 10-year Treasury note serves as the reference for the 30-year mortgage rate because its duration is closer to the average mortgage’s life. In that account, the Fed influences mortgage rates “largely by affecting the financial market’s expectations about inflation.” The link to monetary policy is less direct than for short-term rates, and bond market investors are the ones who set mortgage rates.
Current figures show the gap between the two. Freddie Mac’s Primary Mortgage Market Survey put the 30-year fixed average at 7.18% for the week ending Nov. 5, 2026. The 10-year Treasury yield was 4.84% on Nov. 5. The difference is 2.34 percentage points. Because the two numbers come from different series, that gap illustrates the mortgage spread rather than measuring it officially. A year earlier, Freddie Mac’s 30-year average was 6.22%, or 0.96 point lower.
The survey’s schedule has nothing to do with FOMC meetings. Freddie Mac averages rates from loan applications received through its Loan Product Advisor system from Thursday through Wednesday, and it publishes the result on Thursdays. Its weekly average can therefore change in a week when the Fed takes no action.
What these figures cannot tell you
The figures and benchmarks here are U.S.-only, and each is a dated snapshot. The target range comes from the Oct. 28, 2026 decision, the H.15 and Freddie Mac figures from Nov. 5, and the FDIC averages from Oct. 19. These paths explain how inflation reaches each rate; they do not forecast where any rate will go next.
The next inflation reading is close: the BLS has scheduled the October CPI for Nov. 10, 2026. A new figure would immediately change the real-return arithmetic for the savings and CD averages above. It would not change the target range, which moves only by an FOMC vote.
Check the 10-year Treasury yield on the Fed's H.15 release before comparing mortgage quotes; it shapes mortgage pricing more than FOMC dates do.