Fed Holds Rates at 3.5-3.75% Amid Three Dissents

The Federal Reserve left its benchmark interest rate unchanged last week, keeping the federal funds target range at 3.50% to 3.75% even as inflation has stayed above the 2% goal for more than five years. Three regional Fed presidents dissented and called for an immediate increase, citing persistent price pressures from energy costs, tariffs, and strong demand tied to artificial intelligence investment. New York Fed President John Williams, who supported the hold, told Reuters that inflation should ease in the second half of the year and further in 2027 if energy prices and tariffs have peaked, but added that the central bank would raise rates without hesitation if core data fail to show a sustained path to 2% by 2028. The decision leaves markets pricing in a meaningful chance of a September hike, while long-term bond yields have risen on investor concerns that inflation will remain elevated. Williams noted that the current policy stance is well positioned to bring inflation back to target provided the economy stays on solid footing, and he dismissed any notion that the Fed would simply follow market expectations rather than its own analysis.