Federal Reserve votes 9-3 to leave key rate unchanged
The Fed held rates steady as inflation and energy prices remain high, though growing expectations of a September hike could keep borrowing costs elevated.
The Federal Reserve left its key interest rate unchanged Wednesday despite persistently high inflation and a spike in energy prices caused by the Iran war.
The Fed’s rate-setting committee reached the 9-3 decision after two days of deliberations, marking the fifth straight meeting at which the benchmark rate was kept at around 3.6%.
Dissenting in favor of a quarter-point interest rate 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 been stuck above the central bank’s 2% target for more than five years. The Iran war has generated uncertainty over the economic outlook and has driven energy prices higher, intensifying inflationary pressure and creating a quandary for Fed policymakers. Hammack, Kashkari and Logan had previously called for or signaled that they would be open to raising rates to combat high prices.
New Fed Chair Kevin Warsh, presiding over his second meeting of the central bank’s rate-setting committee, has declared that he has “no tolerance’’ for elevated inflation. He was appointed by President Donald Trump, who has put intense pressure on the Fed to cut rates instead of raising them.
While traders on Wall Street saw a 33% chance the Fed would hike rates Wednesday to tamp down inflation, most expected policymakers to hold off, reluctant to risk disrupting financial markets. But 76% foresee a rate hike in September. A month ago, only 59% of traders expected a September rate increase, according to data from CME.
Fed officials likely want to see more economic data before changing the rate. On Thursday, the Commerce Department delivers the first look at April-June economic growth and it will also publish the Fed’s preferred inflation measure – the personal consumption expenditures (PCE) price index – for June.
Copyright 2026 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.