The US Federal Reserve held its key interest rate steady on Wednesday, leaving it in a range of 3.50–3.75 per cent for the fifth consecutive meeting. The decision by the Federal Open Market Committee drew three dissenting votes – from Cleveland Fed President Beth Hammack, Minneapolis Fed President Neel Kashkari and Dallas Fed President Lorie Logan – who each preferred a quarter-point rate rise. It was the largest bloc of dissent since at least 2016, signalling growing unease inside the central bank over inflation that has run above the 2 per cent target for more than five years.

Inflationary pressures have intensified in recent months. The Fed’s preferred measure, the personal consumption expenditures price index, rose to 4.1 per cent in May, reflecting higher energy costs linked to the conflict in the Middle East, as well as US tariffs and strong AI-driven demand. Although consumer-price inflation eased in June during a brief dip in petrol prices, Brent crude has since surged back above $100 a barrel amid renewed hostilities, stoking uncertainty over the outlook.

Fed Chair Kevin Warsh – appointed by President Donald Trump, who has repeatedly called for lower rates – acknowledged the spirited debate. “I asked for a good family fight and I got one,” he told reporters, while reiterating that the committee has “no tolerance for persistently elevated inflation.” Markets took the hold in stride: the S&P 500 trimmed losses, two-year Treasury yields fell and the dollar weakened. Seema Shah, chief global strategist at Principal Asset Management, said the dissents “send a clear message: The Fed is not yet convinced the inflation battle has been won.” Mattias Persson, chief economist at Swedbank, told Swedish news agency TT that a rate increase could well come in September.

The next key milestone arrives on Thursday, when the Commerce Department releases the June PCE report – the last major inflation data before the Fed’s September meeting. Analysts note that unless price pressures ease markedly or the labour market softens, the balance of opinion within the FOMC may tilt further toward tightening.