Fed Keeps Rates Steady Amid Close Call Decision

The Federal Reserve decided to keep monetary policy unchanged, maintaining the target range for the federal funds rate at 3-1/2 to 3-3/4 percent. The decision was seen as the closest call in a number of years, with three dissenting members - Beth Hammack (Cleveland Fed), Neel Kashkari (Minneapolis Fed), and Lorrie Logan (Dallas Fed) - voting for an immediate 25bp rate hike.

The accompanying statement was brief, acknowledging 'solid' activity and 'elevated' inflation, with a commitment to price stability. In the press conference, Kevin Warsh mentioned that he got the 'good family fight' he wanted to see, but in the end, the committee opted for stability by a 'large majority.'

Markets had been pricing a slightly greater than one-third chance of a 25bp hike ahead of the decision. However, with two inflation prints and two job reports between now and the September FOMC meeting, economists expect stable policy to continue.