WASHINGTON – The Federal Reserve on Wednesday voted to keep its interest rates on hold but not without opposition from three officials who have expressed concern about inflation and want to hike.
Despite growing support among some officials for a rate hike, the Federal Open Market Committee voted 9-3 to leave the federal funds rate in a range between 3.5% and 3.75%.
All the “no” votes came from state presidents – Beth Hammack of Cleveland, Neel Kashkari of Minneapolis and Lorie Logan of Dallas – who have been very clear about the need for higher rates to deal with inflation that has been above the Fed’s 2% target for more than five years.
A statement after the meeting noted that the three opponents “preferred to increase the target range of the federal funds rate by ¼ percentage point at this meeting.”
The no votes presented an early challenge to Chairman Kevin Warsh, whose refusal to provide clear road signs on where monetary policy is headed led to an unusually high level of uncertainty heading into the meeting.
Markets largely expected central bank policymakers to approve another tax cut, although there was some tendency — about a 1-in-3 chance, according to CME Group’s FedWatch tool — that a surprise rate hike was on the cards. Forecast markets had a high level of confidence that the Fed would hold.
Warsh argued that the Fed should spend less time trying to tell markets what it will do and instead stress the conditions under which action will be taken. However, Wednesday’s statement did not give, even if markets expect the Fed to hike in September.
The post-meeting statement was almost identical to the one following the June 17 decision and has been consistent with the Fed’s actions throughout the year, following three rate cuts in the last quarter of 2025.
Officials also noted that “Economic activity is growing at a steady pace despite heightened uncertainty caused, in part, by the Middle East conflict.” The statement also said that job growth “remains in line with the number of workers and the unemployment rate is little changed” as US workers contract.
Like June, the statement ended with a simple announcement, “The Committee will bring about price stability.”
Officials in favor of a tighter policy said inflation has been a burden on households and shows no clear signs of abating. Recent price pressures have reflected both tariffs imposed by President Donald Trump and higher energy costs associated with the Iran conflict.
The full committee in June penciled in a one-quarter increase by the end of 2026.
Governor Christopher Waller has also expressed concern recently about inflation, saying higher rates may be necessary if more progress is not made. However, he voted to hold this meeting.
For his part, Warsh called inflation “an option,” and repeatedly emphasized the importance of price monitoring during a recent hearing on Capitol Hill.
But from a policy perspective, Warsh expressed disdain for the Fed’s past practice of providing guidance on its rate expectations.
In keeping with Warsh’s first meeting, the statement was much shorter than had become the norm. Warsh insisted on changing the way the Fed communicates, even dedicating one of the five forces he created to deal with the issue.
In the weeks leading up to the meeting, FOMC colleagues have expressed different views on policy.
New York Fed Chairman John Williams said he sees current policy as well-positioned to return inflation to its target. However, Logan argued that “modestly” higher rates would be required. Hammack was also an inflation hawk, highlighting the pressure families are facing due to rising prices across the board.
Earlier this week, Trump expressed his support for Warsh, calling him “good” while noting that other Fed officials have “bad intentions” and may be politically motivated.
