July 2026 FOMC Update

The Federal Reserve (Fed) left its target policy rate unchanged today at a range of 3.50%–3.75% by a vote of 9–3. The dissents came from Hammack, Kashkari, and Logan, who preferred a rate increase. The policy statement was virtually unchanged from the June release and aligns with the Committee’s desire to produce a short, simple statement. This is the fifth consecutive meeting without a policy change. The Committee reaffirmed its policy of maintaining ample reserves in the banking system. Warsh also reaffirmed his confidence in the Fed’s ability to deliver price stability.

Current conditions: This information was unchanged from the prior meeting. Economic activity has been expanding at a solid pace. Productivity growth and capital investment are strong. Inflation remains elevated relative to the Committee’s 2% objective, partly reflecting supply shocks from energy price increases. Job gains have kept pace with growth in the workforce, and the unemployment rate has remained relatively steady.

Forward guidance: Warsh continues to avoid forward guidance. Financial markets were discounting unusually high odds of a rate increase today. This could be a byproduct of Chair Warsh’s desire to limit market visibility into the Fed’s intentions. Warsh noted that active, robust discussion took place across the full range of policy options. He also mentioned that reduced forward guidance may have influenced markets during the inter-meeting period.

Policy/Market reaction: Bond yields were higher before the meeting. Short-term yields fell following the decision; however, long-dated Treasury yields continued rising during the press conference. Equities were weaker prior to the meeting and improved modestly following the announcement. During his press conference, Warsh highlighted the increase in nominal and inflation-adjusted yields since the Fed’s last meeting, adding that raising rates could be part of the solution to persistent inflation.