Fed holds interest rates steady in split decision

The Federal Reserve held interest rates steady for the fifth consecutive policy meeting this year, amid a rebound in oil prices driven by renewed tensions in the Middle East.

The central bank voted in a split decision to hold its benchmark interest rate in the range of 3.5% to 3.75%. Minneapolis Fed president Neel Kashkari, Dallas Fed president Lorie Logan, and Cleveland Fed president Beth Hammack dissented, preferring to raise rates by a quarter percentage point. 

Officials made no changes to their policy statement, reaffirming that inflation remains elevated due to the increase in energy prices from the Middle East conflict, and they repeated their commitment that the “committee will deliver price stability.”

The decision comes as the latest reading on inflation showed relief from price growth excluding volatile food and energy prices. The so-called “core” Consumer Price Index dropped to 2.6% in June, from 2.9% a month earlier, as a near 10% decline in gasoline prices helped pull headline inflation down to 3.5%, from 4.2%. Still, that’s only one month, and tensions have flared back up in the Middle East, sending oil prices north again. Fed officials are more attentive to whether higher energy prices could seep through to higher core inflation since it’s a better indicator of actual inflation. 

Many officials signaled ahead of the meeting that they were content to hold rates steady this month, including Fed Governors Lisa Cook, Chris Waller, and Philip Jefferson. But they have also said that if the inflation doesn’t start to cool down soon, a rate hike would be under consideration.

However, Logan said in a speech mid-July that inflation has been too high for too long, and does not appear to be on track to come back to the Fed’s 2% target. She said she believes “modestly higher interest rates would better” right now.

Similarly, Hammack said she saw broad inflation and that businesses are telling her the central bank needs to take action to curb it.  

Fed Chairman Kevin Warsh has repeatedly said that the Fed will deliver price stability, but hasn’t offered direction on interest rates or on what the central bank will do to accomplish that.

Read more: How the Fed rate decision affects your bank accounts, loans, credit cards, and investments

Jennifer Schonberger is a veteran financial journalist covering markets, the economy, and investing. At Yahoo Finance, she covers the Federal Reserve, Congress, the White House, the Treasury, the SEC, the economy, cryptocurrencies, and the intersection of Washington policy with finance. Follow her on X @Jenniferisms and on Instagram.

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