The Federal Reserve kept interest rates steady at its July meeting, holding them between 3.5% and 3.75% in a 9-3 vote. This marked the central bank’s first gathering under Chair Kevin Warsh since his appointment in March and the first time since December 2025 officials chose not to adjust short-term rates.
Warsh rejected the idea that the decision signaled a pause.
Speaking after the meeting, he described it as “a rigorous review of the economic situation” and “a view of what our own homework is.” The Fed, he explained, is writing “a new chapter,” acknowledging inflation has remained above the 2% target for over five years and won’t be resolved quickly.
“Did the Fed take an explicit change in its policy rate today? No,” Warsh said. “But that’s the beginning of the story, not the end.”
U.S. economic activity continues to expand at a steady pace, though conditions remain uncertain due to the ongoing war in Iran. Productivity and capital investment are strong, job gains match workforce growth, and the unemployment rate has stayed nearly flat. Inflation, which reached a three-year high in May, eased slightly in June but remains above the Fed’s target.
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Market expectations aligned with the decision. Eric Orenstein, senior director at Fitch Ratings, pointed out that mortgage rates are at their highest level in a year, and the Fed offered no immediate relief. Lawrence Yun, chief economist at the National Association of Realtors, called the outcome predictable, given inflation isn’t fully under control.
The 9-3 vote revealed internal disagreement. Cleveland Fed President Beth Hammack, Minneapolis Fed President Neel Kashkari, and Dallas Fed President Lorie Logan dissented, favoring a rate increase.
Warsh described the debate as “collegial and constructive.” Despite the split, he expressed confidence in the committee’s direction. “This Fed chairman feels better about this board’s ability to deliver than I did when I started,” he said. Members, he added, are ready to engage in serious discussion.
The dissenting votes leave the door open for a rate hike later this year.
Warsh concluded with a firm statement: “The Fed’s on the case.”