The Federal Reserve held its benchmark interest rate steady at 3.50%-3.75% following its July 29-30 meeting, with three members of the Federal Open Market Committee dissenting in favor of a quarter-percentage-point increase. The decision left the door open for a potential hike later in 2026.
Fed Chair Kevin Warsh, who took office in May, said the central bank "will not waver" on its 2% inflation target, acknowledging that five years of above-target inflation cannot be reversed quickly. The policy statement described the economy as expanding at a solid pace, with job gains keeping up with workforce growth and the unemployment rate little changed.
Escalating US-Iran tensions added to inflationary pressures on Wednesday, when a drone strike hit a US-owned gas tanker at Egypt's Damietta port. The attack pushed global oil prices up 7%, complicating the Fed's path to bringing inflation down.
The decision to hold rates came as prediction markets priced a 67.5% chance of a rate hike in 2026, down eight percentage points over the past day. The market reflects uncertainty over whether the Fed will act at its remaining meetings this year.
The next major signposts for the Fed will be incoming reports on inflation and employment. The data will inform the committee's assessment as it weighs whether to raise rates before year-end.
