The US Federal Reserve left interest rates unchanged on 29 Jul, in line with market expectations, as policymakers weighed signs of persistent inflation and higher energy prices against the risk of slowing economic growth. The decision was approved by a 9-3 vote, with three officials favouring an increase.
The Federal Open Market Committee (FOMC) kept its benchmark rate at 3.5%-3.75%, where it has remained since the Fed's cut in December 2025. Kevin Warsh also left rates unchanged at his first meeting as the Fed's Chair in June.
Cleveland Fed President Beth Hammack, Minneapolis Fed President Neel Kashkari and Dallas Fed President Lorie Logan dissented in favour of a 25-basis-point increase.
Higher-for-longer stance keeps investors cautious
The rate influences borrowing costs across the economy, including mortgages, credit cards and business loans. The Fed said economic activity continued to expand at a solid pace despite heightened uncertainty linked partly to the US conflict in the Middle East. It also pointed to strong productivity growth and capital investment, job gains that had kept pace with workforce growth and little change in unemployment data.
Benjamin Peillard, founder and CEO of Cap, said the decision reinforced the Fed's "higher-for-longer" stance and was likely to keep investors selective.
"Markets avoided the shock of another hike, but they also didn't get the catalyst many investors were hoping for," he said. "We'd expect institutional capital to continue favouring proven, higher-quality assets over others farther out on the risk curve."
Elevated borrowing costs shape institutions' appetite for risk assets, such as cryptocurrencies. "As crypto matures and becomes more integrated in the regulatory regime, it's becoming increasingly tied to those broader macroeconomic forces rather than operating independently from it," Peillard said.
Price pressures raise odds of September hike
The FOMC said inflation remained elevated, partly because supply shocks had pushed up prices in sectors, including energy, and pledged to "deliver price stability."
US consumer-price inflation eased to 3.5% in the 12 months through June, down from 4.2% in May and below economists' expectations of 3.8%. Prices also fell 0.4% from the previous month, the first monthly decline since April 2020. The slowdown reduced pressure on the Fed to raise rates immediately, although inflation remained well above its 2% target and energy prices were still 15.7% higher than a year earlier.
Markets are already looking to the Fed's next meeting on 16 Sep, with traders sharply reducing expectations of a larger rate increase after the decision. Before the meeting, CME FedWatch data showed an 81.9% chance that rates would be higher by the end of September, including a 57.4% probability of a 25-basis-point increase and a 24.5% chance of a larger move.
As only three members voted for an increase, traders reacted by pricing a 53.2% probability of a 25-basis-point increase and a 46.8% chance of no change, effectively eliminating expectations of a larger hike.
Bitcoin (BTC) traded at $64,326 at 18:06UTC, up 0.7% following the decision, as investors digested the Fed's statement and the three dissents in favour of a rate increase.
