The Federal Reserve voted 9-3 at its July 28-29 meeting to maintain the federal funds rate target range at 3.5% to 3.75% [1, 2, 3, 4, 5, 6, 7]. Three policymakers dissented, favoring a 25 basis point increase, citing broad-based price pressures and the risks of acting too late [1, 3]. "Doing so would likely help forestall the need for a steeper and potentially more costly sequence of tightening moves at a later stage," said dissenting Fed regional presidents Beth Hammack, Lorie Logan, and Neel Kashkari [3].

Policymakers noted inflation remains elevated, with the personal consumption expenditures (PCE) price index rising at an annual rate of 3.7% as of June [3, 5, 6, 7]. Several officials indicated that policy tightening might be necessary if inflation does not decline toward the Fed’s 2% target. The minutes stated, "Many participants assessed that policy tightening would likely be necessary if inflation did not decline." [1]

Some officials expressed concern that financial conditions may not yet be restrictive enough to bring inflation down [3, 5, 6, 7]. There was uncertainty on the inflation outlook; some expected it to gradually ease, while many acknowledged it might remain persistently elevated [8, 7]. Discussions also covered the impact of AI investment on inflation. Some staff saw AI-related spending as pushing demand and prices higher, while others believed productivity gains from AI could reduce inflation over time [6].

July’s labor market data showed US nonfarm payrolls declined by 23,000 jobs, while the unemployment rate fell to 4.1% amid a smaller labor force [3, 5].

At his second meeting as Fed Chair, Kevin Warsh suggested reducing the number of annual FOMC meetings from eight to six to allow more economic data to accumulate and more time for deliberation. Warsh stated, "Holding meetings roughly every two months could allow more economic data to accumulate between decisions and give policymakers additional time to consider broader monetary policy issues." [5]

After the Fed meeting, on August 19, the US Treasury announced it would double buybacks of longer-term government debt, easing pressure on yields and helping stocks recover following recent market losses [1, 2, 3, 4, 9, 7].

The next Federal Open Market Committee meeting is scheduled for September 15-16. Economists say a rate hike remains possible depending on inflation and employment data that emerge before then. Diane Swonk, chief economist at KPMG US, noted, "September is still a live meeting for a hike." [10, 11, 5]