Fed Holds Rates at 3.5%-3.75% as Three Officials Dissent
Get the Finance newsletter
Daily finance — markets, central banks, M&A, the prints that move money. Free.
- The Federal Reserve held its target range for the federal funds rate at 3.5%-3.75%, where it has stood since December, opting not to surprise markets with a hike.
- Cleveland Fed's Beth Hammack, Minneapolis Fed's Neel Kashkari, and Dallas Fed's Lorie Logan dissented in favor of a quarter-point rate hike, while nine officials including Chairman Kevin Warsh voted to hold.
- Markets priced the odds of a rate hike at roughly 1 in 3 before the meeting — the most uncertainty around a Fed rate decision in years — amid rumblings that sticky inflation and rising energy prices could force action.
- The post-meeting statement was virtually unchanged from June, repeating language that "economic activity is expanding at a solid pace" despite "elevated uncertainty" tied to "the conflict in the Middle East."
- PCE inflation, the Fed's preferred gauge, has remained above the 2% target every month since March 2021, with June data due Thursday forecast at 3.7% year-over-year.
- Chairman Kevin Warsh, presiding over his second meeting, has eschewed clear forward guidance in favor of a "good family fight" approach where outcomes aren't pre-ordained.
Why it matters: Three regional Fed presidents openly broke with the chair in the most uncertain rate decision in years, and with PCE inflation forecast at 3.7% — nearly double the 2% target — the dissent signals the central bank's patience is wearing thin. The statement's near-identical language to June offers no guidance on whether another hike is coming, forcing markets to parse Warsh's 2:30pm ET press conference for clues.
