Fed Keeps Rates at 3.50%–3.75% in 9–3 Vote; September Hike Odds Rise to 62%

The Federal Reserve left its benchmark rate unchanged at 3.50%–3.75% on July 29, but the decision drew dissent from three officials calling for a 25-basis-point increase. It was the first time since 2016 that three policymakers voted against an FOMC decision in the same direction, a split that markets read as a more hawkish signal and that lifted the implied probability of a September rate hike to 62%. The Federal Open Market Committee voted 9–3 to hold rates, keeping policy on pause as the Fed waits for clearer evidence that inflation is moving toward its 2% target. Cleveland Fed President Beth Hammack, Minneapolis Fed President Neel Kashkari and Dallas Fed President Lorie Logan each backed a quarter-point hike, underscoring their view that inflation remains too high. In its statement, the Fed said the economy continues to expand at a "solid pace," job gains have kept up with labor force growth, and unemployment has changed little. BMO Capital Markets' head of U.S. rates, Ian Lyngen, said the vote suggests "a Committee with vocal hawks." Fed Chair Kevin Warsh offered limited guidance on the next move, emphasizing that upcoming decisions will be driven by incoming data. The statement again highlighted the Fed's focus on "price stability," with inflation risks still in view amid tariffs and higher energy prices. Warsh also addressed rising bond yields, saying, "We're observing the rise in yields, trying to stay out of it." He added, "The Treasury market appears to be signaling many of the same things. While we have not done much over the past 42 days, the markets have done quite a bit." CME's FedWatch Tool puts the odds of a 25-basis-point hike at 62% for September, keeping attention on the next FOMC meeting. Bitcoin initially firmed after the decision, rising about 1.25% to nearly $64,400. Ether also edged up to around $1,911. Institutional flows remain a headwind: spot Bitcoin ETFs posted four straight sessions of net outflows totaling $527 million, including about $49.75 million on July 29. The rate hold provided short-term relief, but risk-asset demand has yet to fully recover.