On Wednesday, July 29, 2026, the US Federal Reserve decided to keep interest rates unchanged in the 3.50 to 3.75 percent range. This decision, widely expected, came amid ongoing concerns about inflation and drew dissent from three of the 12 members of the Federal Open Market Committee (FOMC), who preferred a quarter-percentage-point rate hike.

Kevin Warsh, who became Fed Chair in May 2026, emphasized his "no tolerance" stance on inflation that has exceeded the central bank's 2 percent target for over five years. Inflation had been accelerating until recently due to factors such as the war in the Middle East pushing up global fuel and food prices, and increased demand driven by investments in data centers and artificial intelligence.

The Fed's policy statement noted that "inflation remains elevated relative to the Committee's 2 per cent goal" and that economic activity is "expanding at a solid pace," with job gains keeping pace with the workforce and a stable unemployment rate.

In a press conference following the policy announcement, Warsh stated, "we've begun a new chapter and we understand that the five-plus years of inflation above-target cannot be cured in nine weeks, or by a single month of modest price decreases." He also expressed comfort that markets were not reacting strongly to Fed communications but were relying on their own judgment.

Forecasting firm Inflation Insights' founder, Omair Sharif, said, "At this stage, I think we should expect the FOMC to hike rates by 25 basis points in September unless the labour market data collapses, or core inflation prints closer to 2 per cent annualised, which I do not expect in the July or August readings before the September FOMC."

Despite the absence of rate cuts that some had hoped for, US President Donald Trump publicly supported Warsh, calling him a "brilliant guy" during remarks in the Oval Office.

Warsh has also indicated optimism that rising productivity, aided by artificial intelligence, could help the economy grow faster without increasing inflation.

Sources