Fed Keeps Rates Unchanged Amid Inflation Concerns

The Federal Reserve's recent decision has left the market awaiting clearer policy signals. In its July 2026 outcome, the Federal Open Market Committee (FOMC) chose to keep the Fed funds target range at 3.5%-3.75%, a move that was expected by many. Three FOMC voters dissented in favor of a rate hike, slightly fewer than Societe Generale's expectation of two hawkish dissenters.

Jan Groen from Societe Generale notes the importance of upcoming Core Personal Consumption Expenditures (PCE) Price Index and Consumer Price Index (CPI) data for policy decisions. The Fed's cautious stance on inflation, evident in its decision to stay on hold, is likely driven by softer June inflation data.

According to Groen, a combination of these factors suggests the Fed will be content to stay on hold for now, with possible hikes from late 2026. However, it is worth noting that upcoming Core PCE inflation releases over the remainder of the year will determine if and when the Fed will raise policy rates.