Federal Reserve holds rates as divided FOMC vote fuels rate hike expectations

The Federal Reserve spent the better part of 2025 cutting rates. Now investors are staring down the possibility that the central bank might have to reverse course entirely. The FOMC voted 9-3 at its July 29 meeting to hold the federal funds rate steady at 3.50%-3.75%. The three dissenting votes, each pushing for an immediate 0.25 percentage point hike, tell a very different story. A Fed divided against itself The June 2026 dot plot showed nine FOMC members projecting at least one rate hike before year-end, while eight expected the Fed to stand pat. Chair Kevin Warsh has been emphasizing the price stability mandate in public remarks, consistently arguing that letting inflation linger poses greater long-term risks than tightening too early. The last rate cut came in December 2025, capping an easing cycle that had been widely expected to continue into the new year. Instead, hotter-than-expected inflation readings and energy supply disruptions forced a reassessment. Markets are already repricing According to CME FedWatch Tool readings, expectations for a rate hike at the September 15-16 FOMC meeting have fluctuated between 35% and 60% in recent weeks, with softer CPI prints occasionall...