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Informist, Wednesday, Jul. 29, 2026

MUMBAI – The US Federal Open Market Committee Wednesday left the policy rate unchanged for a fifth consecutive monetary policy meeting, maintaining the target range for the federal funds rate at 3.50-3.75% as policymakers continued to balance resilient economic growth against stubbornly high inflation.

The FOMC decision was not unanimous, however, and was approved by nine votes to three, with the policymakers reiterating that the current policy stance supports the US Federal Reserve's dual mandate of maximum employment and price stability. The central bank said it would continue its policy of maintaining ample reserves in the banking system.

In its policy statement, the rate-setting panel said the US economy continues to expand at a solid pace despite elevated uncertainty, which it attributed in part to the continuing conflict in West Asia. The committee noted that productivity growth and capital investment remain strong, while labour market conditions have held up well, with job gains keeping pace with workforce growth and the unemployment rate remaining broadly stable.

However, the Federal Reserve pointed out that inflation remains above its 2% target and cited supply-side shocks that have pushed up prices in several sectors, particularly energy. The FOMC skipped the words "strongly committed to supporting maximum employment and returning inflation to its 2 percent objective", only reaffirming its commitment to restoring price stability.

US CPI inflation slowed to 3.5% on year in June from 4.2% in May, lower than market expectation as the war was paused briefly, but it remained well above the target. The unemployment rate was 4.2% in June, down from 4.3% in May.

The vote on the policy decision, however, underscored the growing differences within the committee over the appropriate path. Three policymakers--Cleveland Federal Reserve President Beth M. Hammack, Minneapolis Fed President Neel Kashkari, and Dallas Fed President Lorie K. Logan--dissented, voting to raise the federal funds rate by 25 basis points.

After the decision, the 10-year US Treasury yield was hardly changed at 4.63%, as the rate action and commentary were on expected lines. The July meeting was not linked to a release of the summary of economic projections on growth, inflation, and interest rates. At the June meeting, the median forecast by the end of 2026 was 3.75%. Six officials expected the federal funds target range to be 25 bps higher by the end of the year, with three expecting rate hikes adding up to 50 bps. In contrast, only one member saw the policy rate lower than the current level and eight Fed officials saw it remaining unchanged.  End

US$1 = INR 95.64

Reported by Kabir Sharma

Edited by Rajeev Pai

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