U.S. Fed leaves rates unchanged, three members in favour of hike
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- Federal Reserve held rates at 3.50%-3.75% on Wednesday, with three of 12 FOMC members — the Cleveland, Dallas, and Minneapolis Fed presidents — dissenting in favor of a quarter-point hike, the same trio who dissented at Powell's final meeting in April.
- Kevin Warsh said the Fed 'will not waver' on returning inflation to 2%, arguing five-plus years above target 'cannot be cured in nine weeks,' and welcomed rising bond yields since the last meeting, saying markets were pricing on their own judgment rather than reacting to Fed dots or speeches.
- The 30-year Treasury yield crossed above 5.20% for the first time since 2007 as the yield curve steepened sharply, with 2-year yields falling while long-end yields rose.
- Market expectations shifted notably: pre-meeting pricing had about a one-in-three chance of a hike, but after the Fed's statement, CME's FedWatch tool put a 57% chance on a rate increase at the September 15-16 meeting.
- Omair Sharif of Inflation Insights said he expects a 25 basis-point hike in September unless the labor market collapses or core inflation prints close to 2% annualized in July or August readings.
- Kathy Bostjancic of Nationwide called the three dissents a sign policymakers are 'increasingly more hawkish' but argued the Fed should stay on hold because higher rates won't solve the Middle East energy supply shock or the AI capex driving prices.
Why it matters: With three dissents — including the same regional Fed presidents who broke ranks in April — the internal FOMC split is widening publicly, and the post-meeting market repricing (57% September hike odds vs. near-100% pre-statement, per CME) signals traders are now treating a September move as the base case rather than a tail risk.
