Fed holds rates at 350-375 bp as inflation stays elevated

The Federal Reserve held its benchmark interest rate steady at 350–375 basis points on July 29, 2026, citing persistently elevated inflation. It was the central bank’s second policy meeting under Chairman Kevin Warsh. Three of the 12 voting members—Beth M. Hammack, Neel Kashkari, and Lorie K. Logan—dissented, favoring a 25-basis-point increase to 375–400 basis points. Ahead of the meeting, CME FedWatch had assigned a 66.3 percent probability to a hold and a 33.7 percent chance to a hike, reflecting uncertainty after Warsh scrapped the Fed’s traditional forward guidance. Inflation remains well above the Fed’s 2 percent target. The Consumer Price Index rose 3.5 percent in June 2026 from a year earlier, down from 4.2 percent in May, but gasoline prices have climbed sharply. According to AAA, the average U.S. gallon cost $4.09 on July 29, up from $3.86 a month earlier and $2.98 on February 28, 2026, when the U.S. and Israel first struck Iran. The Fed’s statement blamed supply shocks for elevated inflation, especially in energy. Warsh told reporters the committee is focused on data trends, not single reports, and stressed there is “no tolerance” for inflation. At the previous meeting, governors were evenly split on whether to raise rates this year. Consumer confidence fell for the third straight month, The Conference Board reported on July 28, 2026. Chief economist Dana M. Peterson said consumers see little improvement ahead. Barclays economists noted that without clear guidance, markets are speculating Warsh might engineer a surprise hike to bolster the Fed’s anti-inflation credibility. President Trump, who has long pressed for lower rates, praised Warsh as “fantastic” on July 27, 2026, despite ongoing tensions over Fed independence. Analysts at S&P Global had forecast a hold, while Citadel Securities predicted a hike in the days before the July 29 meeting.