Fed splits 9-3 as Kashkari, Logan, Hammack push a hike
Get the Finance newsletter
Daily finance — markets, central banks, M&A, the prints that move money. Free.
- Fed held at 3.5%–3.75% in a 9-3 vote — Kashkari, Logan, and Hammack dissented for a quarter-point hike, the sharpest internal split of Warsh's tenure.link ›
- Kevin Warsh rejected any 'soft inflation target,' telling reporters the committee is studying whether supply shocks are 'broadening' into prices far from energy.link ›
- U.S. GDP slowed to 1.5% annualized in Q2, but consumer spending ran 3.2% and a 11.5% import surge — heavy in chips — subtracted 1.5 points from the headline.link ›
- Iran war drove U.S. gasoline from $2.98 pre-war to over $4 in Q2, with Oxford Economics warning renewed real-income pressure is coming in the second half.link ›
- Bank of Japan held at 1% in an 8-1 vote with Hajime Takata dissenting for a hike to 1.25%, warning core inflation will run 'clearly above' 2% from September.link ›
- Tokyo intervened alongside a U.S. 'rate check,' sending the yen from ~163 to as high as 157.96 before it pared gains.link ›
- Amazon reports Q2 after the bell with $49.3B expected capex (+77% YoY) and AWS growth tracking ~31%, against a jittery hyperscaler backdrop that sank Alphabet and Meta.link ›
- S&P 500 and Nasdaq futures slid as a chip sell-off deepened on AI spending doubts and escalating Chinese competition heading into big-tech earnings.link ›
Kevin Warsh's second FOMC meeting cracked open the Fed: a 9-3 vote to hold at 3.5%–3.75%, with Neel Kashkari, Lorie Logan, and Beth Hammack dissenting for a hike even as core CPI dropped to 2.6%. The economy gives them nothing to hide behind — GDP slowed to 1.5% on an 11.5% AI-driven import surge that subtracted 1.5 points from headline growth, and consumers still managed a 3.2% spending pace. But the Iran war pushed gas from $2.98 back above $4, and PCE inflation is still 3.7% after five years above target. One more dissenter flips the majority. The hawks are begging to hike into a stagflationary mess of their own making.
The stories behind this week
Fed Holds Rates at 3.5%-3.75% as Three Dissent for HikeThe three-dissent vote marks the sharpest internal Fed split of 2026, with Logan, Hammack, and Kashkari publicly breaking ranks to push for tighter policy even as core CPI dipped to 2.6% from 2.9%. With oil rebounding on Middle East tensions, the hawks need only one more dissenter to flip the majority, putting the Fed's next meeting squarely in play for borrowers locked into 3.5%–3.75% rates.
U.S. economic growth slows to 1.5% in second quarter as inflation exceeds Fed targetThe 1.5% headline undersells the economy: domestic demand grew 3.9% annualized, and the slowdown is almost entirely an AI-driven import surge that subtracts from GDP math rather than reflecting real weakness. But with PCE inflation stuck at 3.7% — far above the Fed's 2% target — and three Fed presidents already dissenting for a rate hike, the central bank faces growing pressure to act ahead of November midterms where 72% of voters cite energy prices as a top concern.
Fed Holds Rates Steady at Warsh's Second MeetingWith inflation running above the Fed's 2% target for over five years and visible splits inside the FOMC, Warsh's early leadership is being shaped by a stubborn price problem that has divided his colleagues on whether to hike further.
US GDP Slows to 1.5% as Iran War Lifts Gas PricesThe Fed faces a sharpening bind: weaker-than-expected 1.5% Q2 growth argues for patience, yet three FOMC members voted to hike and core PCE remains at 3.3%. Oxford Economics warns renewed pressure on real incomes is coming in the second half now that gas sits back above $4, meaning the rate path hinges on whether the Iran war's energy shock deepens or fades.
S&P 500, Nasdaq Futures Slide as Chip Sell-Off DeepensThe double hit of AI spending doubts and escalating Chinese chip competition is landing on the tech sector just as investors need Q3 earnings to justify elevated valuations. Chip-heavy names and the Nasdaq are the immediate canaries for whether the AI capex cycle still justifies current multiples.
BOJ Holds at 1%, Flags Inflation Above 2%The 8-1 split and the BOJ's explicit "clearly above 2%" inflation warning from September put the focus on Governor Ueda's press conference for any signal that hikes will accelerate beyond the six-month market baseline. Tokyo's overnight intervention delivered a sharp but partial yen rally (from ~163 to ~158), yet the underlying drivers the BOJ itself flagged — oil, weak yen, and wage-driven prices — remain in place.
Fed Holds Rates at 3.5-3.75% in 9-3 VoteWith the FOMC split 9-3 and rates pinned at 3.5%-3.75%, the Fed cannot ease policy while Iran-driven energy shocks threaten to reignite inflation. Three dissents suggest growing internal disagreement over how long the central bank can justify patience against a war-driven price surge.
Amazon on deck to report earnings after the bell with cloud, capex in focusAmazon's Q2 print arrives after sharp market dispersion: Microsoft surged 15% on results, while Meta dropped 9% and Alphabet sank after a capex hike to $205B. Amazon's expected $49.3B Q2 capex and 31% projected AWS growth put it between the two camps, with several analysts expecting a 2026 forecast lift.
Why it matters: A fourth hawk on the FOMC now flips the majority, and whether one shows up depends almost entirely on whether the Iran war keeps gas above $4 into the September meeting.
