The Federal Reserve kept the federal funds rate unchanged at 3.50%–3.75% at its July 2026 meeting, marking a fifth consecutive hold and aligning with consensus expectations, even though markets had priced in roughly a one-in-three chance of a rate hike. Three FOMC members dissented in favor of a 25-basis-point increase, signaling that a rate rise at the September meeting remains a distinct possibility.
The Fed noted that economic activity continues to expand at a solid pace, despite elevated uncertainty partly tied to the conflict in the Middle East. Productivity growth and capital investment are described as strong. Job gains are broadly matching the growth of the labor force, and the unemployment rate has shown little change.
Inflation remains above the Fed’s 2% target, reflecting in part a series of supply shocks that have pushed up prices in specific sectors, including energy. On its balance sheet policy, the central bank reiterated that it “is continuing its policy of maintaining ample reserves in the banking system.”
