Wall Street breathes a sigh of relief as the Fed holds rates steady

The Federal Reserve held its key interest rate steady as the US central bank concluded its two-day July policy meeting.

Heading into the meeting, Wall Street was unusually jumpy thanks to the novel approach championed by new Fed chair Kevin Warsh.

Under Warsh’s predecessor Jerome Powell, there was much less uncertainty about what the central bank would do at any given meeting due to his policy of letting the economic data drive policy and giving lots of guidance about what the Fed’s committee was thinking about rates.

All that has changed as Warsh abandoned so-called ‘forward guidance’ and ‘data dependency’ in favor of less talking and a more forward-looking approach that depends less on backwards-looking economic data.

‘Market participants are learning to play the ball, not the referee,’ Warsh noted at the post-decision press conference, noting that the central bank ‘need not always be the center of attention.’

The Fed has now held its key interest rate, the federal funds target rate, steady at a range of 3.50 percent to 3.75 percent for five consecutive meetings. 

The last time the Fed changed it up was in early December 2025, when the central bank cut by a quarter of a percent.

The vote on the key rate-setting committee was nine to three, and the three dissenters were in favor of a quarter-point rate increase. 

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After losing ground ahead of the Fed decision, the Dow Jones Industrial Average and the S&P 500 regained much if not all of their losses after the decision.

Fed chair Kevin Warsh has abandoned ‘forward guidance’ and ‘data dependency’ in favor of less talking and a more forward-looking approach

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‘The hold is good news for borrowers and a respite for markets, at a time when tech stocks have already been collapsing,’ Nic Puckrin, markets expert and former Goldman Sachs analyst, told The Daily Mail. 

The policy statement released after the conclusion of the meeting was largely unchanged from June: short, sweet and almost entirely free of any guidance on what the central bank might do next.

‘Since Kevin Warsh became chair, policymakers have been giving fewer hints as to the direction of monetary policy,’ said Puckrin. 

Experts suggested that the three dissents tee up a possible rate hike at the next meeting in September.

‘But there are two months of inflation and labor market data before then, so there’s no reason for Warsh to hint at a move now,’ wrote economist Steve Matthews on X.

Puckrin warned that if tensions between the US and Iran don’t calm down soon, policymakers may have no choice but to hike rates to keep inflation under control. 

‘Inflation remains well above the Fed’s 2 percent target, and unless price pressures cool more convincingly, a rate hike could remain on the table,’ eToro US Investment Analyst, Bret Kenwell told the Daily Mail.

The decline in energy prices in June briefly raised hopes that the Fed could avoid another rate hike, but renewed geopolitical tensions suggest inflation concerns will persist through the summer.

‘Investors shouldn’t dismiss the possibility of an eventual rate hike, particularly as dissent within the committee points to growing discomfort with elevated inflation,’ said Kenwell.