The Federal Reserve has now gone four meetings without touching interest rates, holding its benchmark range at 3.50%–3.75% since the end of 2025. That streak is about to be tested at the July 29 meeting, the first real test of new Fed Chair Kevin Warsh's approach to inflation that refuses to cooperate.
What happened in June
At the June 17 meeting — Warsh's first as chair — the committee voted unanimously to hold rates steady, but the statement itself was notably shorter and dropped language that had previously signaled a bias toward future cuts. The Fed's "dot plot," which tracks individual officials' rate expectations, also shifted: the median projection for year-end 2026 moved up to roughly 3.8%, suggesting more officials now see a hike as plausible than a cut.
The reason is inflation. May's Consumer Price Index came in at 4.2% year-over-year, the fastest pace in three years, driven largely by energy prices tied to conflict in the Middle East. That's more than double the Fed's 2% target, and it's the main reason the committee has stayed in wait-and-see mode instead of following through on rate cuts that were expected earlier in the year.
Why July looks different
Going into July, the picture got murkier rather than clearer. June's jobs report showed payrolls rising by just 57,000, well short of the roughly 115,000 economists expected, with downward revisions to the two prior months. That's a classic signal of a cooling labor market — normally a reason for the Fed to lean toward cuts. At the same time, inflation is still running hot. Warsh has to weigh both signals at once, and so far he hasn't tipped his hand: at a central banking forum in early July, he called inflation "too high" without committing to a direction on rates.
Market pricing reflects that uncertainty. As of this week, futures markets put the odds of a hold at the July meeting around 78%, with the remainder split toward a possible hike — a notable shift from a month earlier, when hike odds were closer to 12%.
Why it matters for you: mortgage rates, credit card APRs, and savings account yields are all downstream of this decision. A hold keeps things roughly where they are; a hike would push borrowing costs up further and could — for once — be good news for savers.
What to watch next
- July jobs report — released before the FOMC meeting, another weak print would strengthen the case for a hold or even a cut.
- June CPI data — if inflation eases from May's 4.2%, it takes pressure off the Fed to hike.
- Warsh's public remarks — as the newest chair, his communication style is still being read closely by markets for hints of a shift in approach.
We'll update this piece after the July 29 decision. For now, the safest assumption is that current rates — and the borrowing and savings costs tied to them — are likely to hold for at least one more cycle.