Overview
- The Federal Open Market Committee voted 9-3 on July 29 to keep the federal funds rate at 3.50%–3.75%, marking the fifth straight meeting with no change.
- Cleveland Fed president Beth Hammack, Minneapolis president Neel Kashkari and Dallas president Lorie Logan publicly dissented and said a 25 basis-point hike was needed because inflation remains too high.
- Markets reacted sharply after the meeting and Warsh's remarks, with long-term Treasury yields climbing to multi-year highs and major U.S. equity indexes sliding by roughly 1,100 to 1,150 points on the Dow.
- Warsh said the Fed will pull back forward guidance so markets provide 'direct and unfiltered' signals and he has set up five task forces to review Fed communications, balance-sheet policy and the inflation framework ahead of Jackson Hole.
- Traders now put significant odds on a September hike, which would raise borrowing costs for households and businesses if inflation does not cool and would force the Fed to weigh pressure from its own officials against political forces in Washington.