The Fed faces a politically fraught rate decision on the eve of an election for the third time in a row

Federal Reserve interest rate changes on the eve of elections are tricky propositions, but for the third election in a row, the central bank may be unable to dodge that prospect after a hot inflation reading on Wednesday.

New Consumer Price Index data showed inflation heated up again in September , rising 3.7% annually and posting a 0.6% month-over-month surge. Core inflation, the measure more closely watched by the Fed, was also hotter than expected, rising 2.6% annually and 0.3% monthly. Following Wednesday's CPI release, odds of an October rate hike immediately spiked.

That new data comes as the next Federal Open Market Committee interest rate decision is scheduled for Oct. 28, just six days before Election Day.

"There is a political implication for going in October," Wolfe Research chief economist Stephanie Roth told Yahoo Finance on Wednesday, adding that committee members "would very much prefer not to do it," but the data is making a rate hike a distinct possibility.

"This makes the October meeting live," Roth said of the inflation reading.

The timing means that economic developments could force interest rate changes in the campaign's home stretch — and potentially lead to political fallout for the central bank.

On Nov. 2, 2022, the central bank raised rates ahead of midterm voting as part of a series of hikes that prominent Democrats often blasted .

Two years later, the Fed cut rates on Sept. 18, 2024 (the last meeting before that election), which then-candidate Donald Trump immediately called "a political move to try and keep somebody in office."

This year, President Trump has often loudly expressed his desire for lower interest rates and even recently revealed he gave Fed Chairman Kevin Warsh advice on how to vote before the last meeting. The Fed raised rates in September, the first hike in three years.

'Warsh already broke the September mold'

Central bankers often stress that they make decisions based solely on economic signals, but Wednesday's data tees up a politically fraught decision — one the Fed has often been able to sidestep.

A recent analysis from Mark Shore of the CME Group found that prior to 2022, 1978 was the last time the central bank raised rates in October or November ahead of a midterm election.

The bank has historically avoided rate hikes in meetings that begin in October of election years. Shore's findings show that the Fed has not acted 67% of the time in those cases, and when it did, it was more likely to be an interest rate cut than a hike.