Divided Federal Reserve Holds Rates Steady as Three Officials Push for a Hike

The Federal Open Market Committee left the federal funds target range unchanged at 3.50% to 3.75% following its late-July meeting, the second chaired by Fed Chair Kevin Warsh. The decision was approved by a 9-3 vote, an unusually wide split that underscored growing divisions on the committee, with three policymakers dissenting in favour of an immediate rate increase. In its statement, the Fed said economic activity was expanding at a solid pace despite elevated uncertainty tied in part to the conflict in the Middle East, and noted that productivity growth and capital investment remained strong. It described the labour market as broadly stable, with job gains keeping pace with the workforce and the unemployment rate little changed. However, it repeated that inflation remains elevated relative to its 2% goal, partly reflecting supply pressures and a sharp rise in oil prices during July. Markets read the hawkish split as keeping a possible rate increase on the table at coming meetings, even as some investors continued to bet the Fed would hold through year-end.