The Federal Reserve decided not to raise interest rates in July, with three dissenting votes demonstrating greater independence among the committee members.
2026-07-30 04:00:50
On July 29, the Federal Reserve's FOMC voted 9-3 to maintain the target range for the federal funds rate at 3.5%-3.75% for the fifth consecutive time. Three voting members, Beth Hammack, Neel Kashkari, and Lorie Logan, voted against the decision, arguing for a 25 basis point rate hike. Compared to the unanimous 12-0 vote at the previous meeting, the number of dissenting votes increased significantly this time, indicating a widening internal division. 
In terms of wording, the Federal Reserve reiterated that economic activity was "solidly expanding," with strong productivity growth and capital investment; job growth was in tandem with labor force expansion, and the unemployment rate remained largely unchanged; however, inflation remained above the 2% target, partly due to supply shocks in sectors such as energy. Barclays characterized this as a "hawkish hold-up." Market Performance and Expectations : Interest Rate Expectations: The market is no longer fully pricing in a September rate hike, with the September contract premium falling to approximately 18 basis points (from 25 basis points before the meeting); Federal funds futures trading was active in August, with open interest exceeding 1 million contracts for the first time. Bonds: The 10-year Treasury yield initially fell before rising sharply, dropping from around 4.635% before the decision to below 4.61%, then continuing to climb during the Warsh conference, with the increase widening to 1.35% to 4.666%, significantly higher than the level before the statement; the two-year yield also surged. Gold: Spot gold surged, briefly breaking through $4,100/ounce, up nearly $60 from before the decision, before retreating about $20 from its peak as yields rose. Stock Market: The three major stock indices initially faced pressure, but rebounded significantly during Warsh's speech, with the Nasdaq turning positive. Currencies: The US dollar index weakened slightly before the decision, while commodity currencies (Australian dollar, New Zealand dollar) saw significant declines. Warsh's Press Conference Highlights : Reiterating the 2% Inflation Target: Warsh emphasized at the outset that there is no implicit higher tolerance for inflation, and the sole target is 2%. Not Calling the Decision a "Pause": Warsh stated that if today's decision were described as a "pause," financial markets would take the opposite view. He himself would not use the term "pause" to describe what was done today, saying, "This is just the beginning of the story, not the end." " Interest Rates May Be Part of the Solution": Warsh made this statement when asked about ways to deal with persistently high inflation. " The Dissenting Votes Did Not Fully Reflect the Substance of the Discussion": Warsh's comment on the three dissenting votes. Four Key Topics: Warsh introduced the four main topics of discussion at the meeting: high inflation over the past five years, recent economic shocks, price increases caused by these shocks, and monetary policy tools and strategies. His stance on market pricing: Warsh stated that the Fed "closely monitors but is not bound by market prices," adding that the market does not adjust its pricing because of the Fed, but rather reflects the tighter financial environment itself, which he considers a "beneficial development." Forward Guidance : He believes that providing forward guidance during a crisis is prudent, but this tool deserves re-evaluation when the economy is relatively stable, and reducing reliance on it requires a "transition period." Working Group Details : Warsh revealed the establishment of five working groups, selecting 15 experts to discuss five issues, with preliminary research results to be released in September and a final report in December; the Fed will consider their opinions, but the decision-making power remains with the Fed itself, and the working groups "will not be decided by it." Jackson Hole : Warsh stated that he has not yet begun considering the content of his August Jackson Hole speech and will review it with the working groups before the meeting. Institutional Views : Ryan Detrick, Chief Market Strategist at Carson Group: The Fed's decision to keep interest rates unchanged was in line with market expectations, but the real question now is: how much pressure will the Fed face to raise rates at its September meeting? He points out that US inflation remains high, coupled with a sharp rise in international oil prices, leading the market to widely expect the Fed's next rate hike to likely occur in September. However, Detrick also cautions against ignoring the positive signals from recent inflation data. Last month, the rate of increase in housing, clothing, and car prices all slowed, indicating that some inflationary pressures are easing. He believes that because inflation remains high and oil prices continue to climb, while recent price data has improved, the Fed is currently facing a very difficult policy decision. Steve Corano, Chief Investment Officer at Integrated Partners: The Fed's decision to keep interest rates unchanged was in line with market expectations, but the biggest change is that compared to the last meeting, the number of dissenting votes for a rate hike has further increased, with more and more voting members beginning to favor a rate hike. He believes that Warsh's remarks at the press conference will be key to judging the future policy direction. However, it should be noted that Warsh is a typical supply-side economist. If current inflation is primarily supported by rising energy prices, then raising interest rates would only curb demand, not increase oil supply. Therefore, until core inflation data provides a clearer direction, the Fed's baseline scenario remains one of observation and waiting for more data. Corano also pointed out that the five working groups previously established by Warsh will release preliminary research results in September and a final report in December. Barring unforeseen major events, this timeline provides Warsh with more room to maintain interest rates in the short term, and the Fed has reason to wait for the relevant research results before deciding on its next policy move. KPMG Chief Economist Diane Swonk believes the Fed will raise rates in September: "I actually think it would have been better to raise rates today. High inflation has persisted for five years. It's not entirely the Fed's fault, but whether or not to take action is the Fed's own choice. High price increases have lasted too long and are becoming the norm." Barclays characterizes today's rate decision as hawkish, with three dissenting votes fueling bets on rate hikes in the coming months. Mark Hackett, chief market strategist at Nationwide Investment Management Group: These dissenting votes may reflect a new trend, with committee members showing greater independence and no longer deliberately maintaining a unified stance. Previously, Citadel Securities released a report calling for a rate hike, so the market is experiencing a relief rally after the rate decision. Nevertheless, it is too early to draw conclusions about market trends before Warsh's press conference. Foreign exchange rate strategist Audrey Childe-Freeman: Based on today's decision, the market saw some yield easing and a weaker dollar, but the three dissenting votes and the overall tone of the statement indicate that we are still in data-watching mode and cannot rule out a September rate hike. The yield-driven bullish dollar logic still holds true this summer. Institutional analyst Chris Anstey: I am very interested in the direction of the 10-year yield during and after the press conference. Currently, the yield is higher than before the statement was released. If long-term yields begin to reflect market concerns about the Fed's insufficient efforts to curb inflation, this will be bad news for Warsh. Not to mention Bessant, who has consistently emphasized the paramount importance of the 10-year yield, serving as the benchmark for mortgages and other loans. Politico: The Fed's 9-3 vote in favor of raising interest rates indicates growing support for higher rates to combat persistently high inflation. The 9-3 vote provides President Trump with a respite, preventing even higher rates from materializing immediately. However, it remains unclear how long this situation will last. The market widely expects at least one rate hike from the Fed this year.
In terms of wording, the Federal Reserve reiterated that economic activity was "solidly expanding," with strong productivity growth and capital investment; job growth was in tandem with labor force expansion, and the unemployment rate remained largely unchanged; however, inflation remained above the 2% target, partly due to supply shocks in sectors such as energy. Barclays characterized this as a "hawkish hold-up." Market Performance and Expectations : Interest Rate Expectations: The market is no longer fully pricing in a September rate hike, with the September contract premium falling to approximately 18 basis points (from 25 basis points before the meeting); Federal funds futures trading was active in August, with open interest exceeding 1 million contracts for the first time. Bonds: The 10-year Treasury yield initially fell before rising sharply, dropping from around 4.635% before the decision to below 4.61%, then continuing to climb during the Warsh conference, with the increase widening to 1.35% to 4.666%, significantly higher than the level before the statement; the two-year yield also surged. Gold: Spot gold surged, briefly breaking through $4,100/ounce, up nearly $60 from before the decision, before retreating about $20 from its peak as yields rose. Stock Market: The three major stock indices initially faced pressure, but rebounded significantly during Warsh's speech, with the Nasdaq turning positive. Currencies: The US dollar index weakened slightly before the decision, while commodity currencies (Australian dollar, New Zealand dollar) saw significant declines. Warsh's Press Conference Highlights : Reiterating the 2% Inflation Target: Warsh emphasized at the outset that there is no implicit higher tolerance for inflation, and the sole target is 2%. Not Calling the Decision a "Pause": Warsh stated that if today's decision were described as a "pause," financial markets would take the opposite view. He himself would not use the term "pause" to describe what was done today, saying, "This is just the beginning of the story, not the end." " Interest Rates May Be Part of the Solution": Warsh made this statement when asked about ways to deal with persistently high inflation. " The Dissenting Votes Did Not Fully Reflect the Substance of the Discussion": Warsh's comment on the three dissenting votes. Four Key Topics: Warsh introduced the four main topics of discussion at the meeting: high inflation over the past five years, recent economic shocks, price increases caused by these shocks, and monetary policy tools and strategies. His stance on market pricing: Warsh stated that the Fed "closely monitors but is not bound by market prices," adding that the market does not adjust its pricing because of the Fed, but rather reflects the tighter financial environment itself, which he considers a "beneficial development." Forward Guidance : He believes that providing forward guidance during a crisis is prudent, but this tool deserves re-evaluation when the economy is relatively stable, and reducing reliance on it requires a "transition period." Working Group Details : Warsh revealed the establishment of five working groups, selecting 15 experts to discuss five issues, with preliminary research results to be released in September and a final report in December; the Fed will consider their opinions, but the decision-making power remains with the Fed itself, and the working groups "will not be decided by it." Jackson Hole : Warsh stated that he has not yet begun considering the content of his August Jackson Hole speech and will review it with the working groups before the meeting. Institutional Views : Ryan Detrick, Chief Market Strategist at Carson Group: The Fed's decision to keep interest rates unchanged was in line with market expectations, but the real question now is: how much pressure will the Fed face to raise rates at its September meeting? He points out that US inflation remains high, coupled with a sharp rise in international oil prices, leading the market to widely expect the Fed's next rate hike to likely occur in September. However, Detrick also cautions against ignoring the positive signals from recent inflation data. Last month, the rate of increase in housing, clothing, and car prices all slowed, indicating that some inflationary pressures are easing. He believes that because inflation remains high and oil prices continue to climb, while recent price data has improved, the Fed is currently facing a very difficult policy decision. Steve Corano, Chief Investment Officer at Integrated Partners: The Fed's decision to keep interest rates unchanged was in line with market expectations, but the biggest change is that compared to the last meeting, the number of dissenting votes for a rate hike has further increased, with more and more voting members beginning to favor a rate hike. He believes that Warsh's remarks at the press conference will be key to judging the future policy direction. However, it should be noted that Warsh is a typical supply-side economist. If current inflation is primarily supported by rising energy prices, then raising interest rates would only curb demand, not increase oil supply. Therefore, until core inflation data provides a clearer direction, the Fed's baseline scenario remains one of observation and waiting for more data. Corano also pointed out that the five working groups previously established by Warsh will release preliminary research results in September and a final report in December. Barring unforeseen major events, this timeline provides Warsh with more room to maintain interest rates in the short term, and the Fed has reason to wait for the relevant research results before deciding on its next policy move. KPMG Chief Economist Diane Swonk believes the Fed will raise rates in September: "I actually think it would have been better to raise rates today. High inflation has persisted for five years. It's not entirely the Fed's fault, but whether or not to take action is the Fed's own choice. High price increases have lasted too long and are becoming the norm." Barclays characterizes today's rate decision as hawkish, with three dissenting votes fueling bets on rate hikes in the coming months. Mark Hackett, chief market strategist at Nationwide Investment Management Group: These dissenting votes may reflect a new trend, with committee members showing greater independence and no longer deliberately maintaining a unified stance. Previously, Citadel Securities released a report calling for a rate hike, so the market is experiencing a relief rally after the rate decision. Nevertheless, it is too early to draw conclusions about market trends before Warsh's press conference. Foreign exchange rate strategist Audrey Childe-Freeman: Based on today's decision, the market saw some yield easing and a weaker dollar, but the three dissenting votes and the overall tone of the statement indicate that we are still in data-watching mode and cannot rule out a September rate hike. The yield-driven bullish dollar logic still holds true this summer. Institutional analyst Chris Anstey: I am very interested in the direction of the 10-year yield during and after the press conference. Currently, the yield is higher than before the statement was released. If long-term yields begin to reflect market concerns about the Fed's insufficient efforts to curb inflation, this will be bad news for Warsh. Not to mention Bessant, who has consistently emphasized the paramount importance of the 10-year yield, serving as the benchmark for mortgages and other loans. Politico: The Fed's 9-3 vote in favor of raising interest rates indicates growing support for higher rates to combat persistently high inflation. The 9-3 vote provides President Trump with a respite, preventing even higher rates from materializing immediately. However, it remains unclear how long this situation will last. The market widely expects at least one rate hike from the Fed this year.
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