Fed votes 9-3 to leave key rate unchanged despite persistently high inflation

Fed votes 9-3 to leave key rate unchanged despite persistently high inflation By Paul Wiseman/The Associated Press July 29, 2026 - 11:22 am WASHINGTON — The Federal Reserve’s policymakers kept the benchmark interest rate steady at roughly 3.6% after a two‑day meeting, marking the fifth consecutive session in which the rate was left unchanged. The vote was 9‑3, with three officials favoring a quarter‑point increase. Dissenting in favor of a hike were Beth Hammack, president of the Federal Reserve Bank of Cleveland; Neel Kashkari, president of the Minneapolis Fed; and Lorie Logan, president of the Dallas Fed. Inflation has remained above the central bank’s 2% target for more than five years. The Iran conflict has heightened economic uncertainty, pushed energy prices higher, intensified inflationary pressures and created a dilemma for policymakers. Hammack, Kashkari and Logan had previously indicated openness to raising rates to curb high prices. New Fed Chair Kevin Warsh, overseeing his second meeting of the rate‑setting committee, said he has “no tolerance” for elevated inflation. Warsh was appointed by President Donald Trump, who has urged the Fed to cut rates rather than raise them. Wall Street traders assigned a 33% probability to a Wednesday rate hike aimed at taming inflation, while most expected policymakers to hold off to avoid disturbing financial markets. Yet 76% now anticipate a rate increase in September, up from 59% a month earlier, according to CME data. Fed officials said they prefer to see additional economic data before adjusting rates. On Thursday, the Commerce Department will release its first estimate of second‑quarter growth and will also publish the Fed’s favored inflation gauge — the personal consumption expenditures (PCE) price index — for June. Geopolitical tension in Iran adds further uncertainty. Oil prices briefly spiked above $100 a barrel last week amid intensified fighting, though they have since eased on hopes that the United States and Iran can de‑escalate the situation. Early Wednesday, Jordan intercepted missiles launched from Iran just hours after the U.S. military reported shooting down another Iranian barrage aimed at American forces in the Middle East, ending a short lull in hostilities. Following U.S. and Israeli strikes on February 28, Iran closed the Strait of Hormuz — a conduit for about one‑fifth of global oil and natural‑gas supplies. That move triggered the largest oil‑supply disruption in recent history and sent energy prices soaring. Prices have since fluctuated with the shifting dynamics of the conflict and negotiation efforts, but the average barrel now costs $10 to $15 more than it did at this time last year. Inflation has topped the Fed’s 2% target since early 2021, when the U.S. economy overheated emerging from COVID‑19 lockdowns. It peaked just above 9% in mid‑2022 and began to recede after the Federal Reserve enacted 11 rate hikes in 2022 and 2023. Progress, however, has largely stalled. Besides the Iran war, other inflationary forces include President Donald Trump’s tariffs on imported goods and a boom in data‑center investment to power artificial intelligence, which is raising the cost of computer chips, equipment and electricity. Core inflation — which strips out volatile food and energy components — eased in June, partly because apartment rents are no longer accelerating as they once did. A short‑term dip in gasoline prices last month also helped keep overall inflation in check. Nevertheless, several Fed officials maintain that rate increases will be necessary to bring inflation back to the 2% target. Christopher Waller, an influential member of the Fed’s governing board, declared, “Sternly staring at inflation until it melts before our withering regard is not an option,” in a speech earlier this month. Read the full story at Las Vegas Review-Journal →