By The Associated Press
The Federal Reserve left its key interest rate unchanged Wednesday despite persistently high inflation and a spike in energy prices caused by the Iran war.
The Fed’s rate-setting committee reached the 9-3 decision after two days of deliberations, marking the fifth straight meeting at which the benchmark rate was kept at around 3.6 percent. Dissenting in favor of a quarter-point interest rate hike were Beth Hammack, president of the Federal Reserve Bank of Cleveland; Neel Kashkari, president of the Minneapolis Fed; and Lorie Logan, president of the Dallas Fed. Inflation has been stuck above the central bank’s 2 percent target for more than five years.
The Iran war has generated uncertainty over the economic outlook and driven energy prices higher, intensifying inflationary pressure and creating a quandary for Fed policymakers. The average cost for a barrel of oil is $10 to $15 more today than it was at this point last year. Hammack, Kashkari and Logan had previously called for or signaled that they would be open to raising rates to combat high prices.
New Fed Chair Kevin Warsh, presiding over his second meeting of the rate-setting committee, has declared that he has “no tolerance” for elevated inflation. He was appointed by President Donald Trump, who has put intense pressure on the Fed to cut rates rather than raise them.
Inflation peaked at just over 9 percent in mid-2022 and began to drop after 11 rate hikes by the Fed in 2022 and 2023. But progress has largely stalled. Core inflation, which excludes volatile food and energy prices, cooled in June partly because apartment rents are not rising as fast as they had been. A temporary drop in gasoline prices last month also helped contain overall inflation.
While traders on Wall Street saw a 33 percent chance the Fed would hike rates Wednesday, most expected policymakers to hold off, reluctant to risk disrupting financial markets. However, 76 percent of traders now foresee a rate hike in September. A month ago, only 59 percent of traders expected a September rate increase.
The hold decision could be seen as welcome news for consumers, though they may not feel much relief with the average credit card rate still near 20 percent and mortgage rates at their highest level since last August.
Source: Las Vegas Review-Journal / The Associated Press, July 29, 2026.