Fed holds rates steady, three officials dissent favoring a hike

Jonnelle Marte, Bloomberg News on Jul 29, 2026

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Federal Reserve Chairman Kevin Warsh insisted policymakers’ decision to leave interest rates unchanged wasn’t a sign of inertia at the central bank, which he reiterated is committed to tackling inflation.

The Federal Open Market Committee voted 9-3 to hold the benchmark federal funds rate in a range of 3.5% to 3.75%. Dallas Fed President Lorie Logan, Cleveland’s Beth Hammack and Minneapolis Fed chief Neel Kashkari dissented in favor of raising rates by a quarter percentage point.

The fractured vote signaled growing conviction among some policymakers that higher rates are needed to curb resurgent price pressures.

The committee’s post-meeting statement was otherwise identical to the one issued following their June meeting. Officials repeated their pledge to “deliver price stability.”

“For some households, businesses and market professionals, five years of high inflation have left a mistaken impression-that’s hard to shake — that the Fed’s implicit inflation target was somehow above 2%,” Warsh told reporters after the decision.

“Let me reiterate: There is no soft inflation target,” he added. “There is no soft implicit target, not on this committee’s watch.”

The vote marked the fifth straight time officials have opted to leave rates unchanged. But the dissents suggest it could become more challenging for Warsh, who took the helm in May, to continue holding if inflation fears grow.

Two-year Treasury yields fell.

Despite his previous vows to restore inflation to the Fed’s 2% goal, Warsh has stopped short of saying he would raise rates. In response to a question from reporters on Wednesday, he edged slightly closer to that step.

“If inflation continues to be elevated through the forecast period, interest rates could well be part of that solution, but I wouldn’t say it’s in isolation,” he said.

Asked why the Fed the didn’t raise rates today, he said market rates had climbed since their last policy meeting, suggesting investors are doing some of the central bank’s work for it. And he attributed that to his own decision to pare back the guidance the Fed typically offers on future potential rate moves.

“Markets have made decisions because we step back in part from trying to influence those,” he said. “Market judgments have moved up on what nominal rates are across the Treasury curve.”

Mounting pressure

Before the meeting, several officials said policy was well positioned, but also signaled they could back rate increases if price pressures don’t ease soon. The Fed’s preferred inflation gauge has accelerated in recent months, hitting 3.4% in the year through May. Officials will get fresh inflation data Thursday.

A weaker-than-expected reading of inflation in June took some pressure off policymakers to raise rates this week. U.S. consumer prices fell last month for the first time in six years as gasoline prices declined during an interim in the Iran war. A separate report showed producer prices also rose by less than expected last month.

Still, officials are facing mounting price pressures after a re-escalation of the war sent Brent crude soaring past $100 a barrel. While oil prices have declined again in recent days, Brent remained near $90 Wednesday morning.

Uncertainty around the conflict, combined with a new slate of tariffs and an AI-fueled demand boom, have added to fears inflation could remain elevated for an extended period.

The labor market, meanwhile, has seen months of modest but steady employment growth and a stable unemployment rate.

The Fed’s post-meeting statement repeated that economic activity is expanding at a “solid pace,” and again noted capital investment and productivity growth are strong. Officials also continued to characterize inflation as elevated relative to the central bank’s 2% target.

A few economists predicted before the meeting that Warsh might surprise investors by backing a rate increase. Pricing in federal funds futures put the odds as high as 40% in the days before the gathering.

(With assistance from María Paula Mijares Torres, Catarina Saraiva and Maria Eloisa Capurro.)