The Federal Open Market Committee on Wednesday decided, by a 9-to-3 majority, to maintain the target range for the federal funds rate at 3.5% to 3.75%.
Given the pressures inflicted over the last year and a half by President Donald Trump to bring the key rate down, one might assume the three dissenting votes supported a quarter- or even half-point reduction. But that was far from the case.
Instead, FOMC governors Beth Hammack, Neel Kashkari, and Lorie Logan voted to raise the target range by a quarter point.
While multiple governors breaking from the majority decision is a pastime that until recently had taken a 32-year hiatus – from 1993 up until exactly one year ago, in July 2025 – it has become almost routine since.
But this vote had a different flavor. It is the first time since the July 2023 FOMC meeting, when the target range reached a post-pandemic high of 5.25% to 5.5%, that any number of governors said they preferred to raise rates.
In essence, though, it lines up with what we reported earlier this week: that CME Group’s FedWatch tool was putting the odds at about 2-to-1 that the key rate would remain unchanged, rather than go up a quarter point. The actual FOMC vote was a wider ratio, at 3-to-1, but still signifying notable disagreement.
Yet in his post-meeting remarks, Federal Reserve Board Chairman Kevin Warsh, presiding over just his second FOMC meeting, projected an air of unity. He said the committee’s goal has not wavered: a strict target of 2% inflation.
In keeping with the theme introduced at Warsh’s first meeting, the new chairman’s FOMC offered, and figures to continue to offer, little in the way of forward guidance. There was barely any mention of trends in the housing market in any information released on Wednesday.
However, Warsh said that doesn’t mean his Fed isn’t having those types of conversations internally.
“There was nothing inertial about our discussions, our policy, or our strategy,” his remarks stated.
At least for the moment, financial markets reacted viscerally to the Fed’s decision, and Warsh’s comments. The Dow Jones Industrial Average closed down more than 2%, registering its worst day since April 2025.
Warsh hopes such responses will become the exception, rather than the rule they have been.
“Market participants are learning to play the ball, not the referee – and market prices will continue to respond in the direction and magnitude they see fit,” he said. “This is, in my view, a change for the better – and we are just getting started.”
How industry professionals react to the news remains to be seen, but Structured Finance Association CEO Michael Bright issued a statement supporting the Federal Reserve’s decision.
“The Federal Reserve’s decision to hold rates steady is a prudent one amid continued uncertainty surrounding inflation, economic growth and global events. Clear communication about the path ahead will be important, as greater policy certainty can help reduce volatility and promote more stable financing conditions,” Bright said.
It is expected that mortgage rates will go up due to the FOMC’s decision.
The FOMC will conclude the summer of 2026 with one more meeting, scheduled for Sept. 15 and 16.