Fed Holds Rates Steady as Risk Assets Get Respite

The Federal Reserve's FOMC meeting on July 29 saw a 9-to-3 vote to keep the federal funds rate unchanged at 3.50%-3.75%. Chair Kevin Warsh emphasized that maintaining a 2% inflation target is non-negotiable, while highlighting AI-related high-tech investment as an important driver of steady economic expansion.

Three committee members voted in favor of a 25-basis-point rate hike, the first time since 2016 that three dissenting votes were cast in the same direction. Market analysts interpreted this as a 'hawkish wait-and-see' stance, indicating that while a rate hike has not yet materialized, the tightening direction remains unchanged.

The probability of a September rate hike fell from nearly 80% to about 65%, according to CME FedWatch data. This brief respite allowed risk assets to recover some lost ground, with Bitcoin experiencing a modest increase in value.