Fed Holds Rates, but Divided Vote Adds Rate-Hike Uncertainty

What happened

The Federal Reserve voted 9-3 to keep the federal funds rate at 3.50%-3.75% at its July 29 meeting, with three officials dissenting in favor of a 0.25 percentage point hike. The June dot plot showed nine FOMC members projected at least one rate increase before year-end. July CPI rose 3.4% from a year earlier, while core CPI cooled to 2.5%. Market-based odds for a September 15-16 rate hike have fluctuated between 35% and 60%, according to CME FedWatch.

Why it matters

The rare public split inside the Fed, combined with still-elevated inflation and energy prices, raises the risk that the rate-cut cycle that ended in December 2025 will reverse into hikes. If a 25-basis-point increase comes as soon as December, it would be one of the fastest policy pivots in recent Fed history, potentially hitting long-dated bonds and growth stocks.