Fed Holds Rates Steady, Signals One More Cut in 2026
The Federal Reserve maintained its benchmark rate at 4.25-4.50%, with Chair Powell indicating data dependency will guide the path forward.
The Federal Reserve held interest rates unchanged at its July meeting, keeping the federal funds rate in the 4.25-4.50% range. Chair Jerome Powell emphasized that while inflation has continued its gradual descent toward the 2% target, the labor market remains “resilient enough to warrant patience.”
The updated dot plot showed a median expectation of one additional 25 basis point cut before year-end, down from two projected in March. Core PCE inflation came in at 2.6% for June, above the Fed’s comfort zone but showing a clear downward trend from the 2.9% registered in January.
Treasury yields moved modestly lower across the curve, with the 10-year note falling 5 basis points to 4.12%. Equity markets rallied on the news, with the S&P 500 gaining 0.8% as investors interpreted the hold as consistent with a soft landing scenario.
Market participants are now pricing in a 72% probability of a September rate cut, according to CME FedWatch data. The next key data point will be the July employment report, due August 7.