Fed Holds Rates Steady Amid Elevated Inflation and Middle East Tensions

The Federal Open Market Committee (FOMC) decided to keep the federal funds rate at 3-1/2 to 3-3/4 percent on July 29, 2026. This decision was a surprise as market expectations had priced in a roughly one-third chance of a 25-basis-point rate hike.

The EURUSD pair appreciated by 0.1144% following the announcement, climbing from 1.1367 to 1.138. This modest gain reflected a market adjustment as the anticipated rate hike did not materialize, leading to a slight reduction in dollar strength.

The European Central Bank (ECB) had also decided to keep its three key interest rates unchanged on July 23, 2026, with the deposit facility rate remaining at 2.25%. This decision was made against a backdrop of eurozone annual inflation standing at 2.8% in June 2026.