NEWS AND INSIGHTS | INSIGHTS

CIO Notebook: Fed Holds Steady, Sets the Stage for a September Showdown

July 30, 2026
Shannon L. Saccocia, CFA, Chief Investment Officer—Wealth

Core CPI has remained above the Fed's 2% target for over five years, and a stable labor market keeps pressure on rate expectations heading into the Jackson Hole and September meetings.

Despite odds of a hike rising over the prior two weeks, the Federal Open Market Committee (“FOMC”) held the fed funds target rate steady at 3.50% to 3.75% following their July meeting. The statement was essentially unchanged, aligned with Fed Chair Kevin Warsh’s intention to limit the delivery of forward guidance. While the language was consistent, there were three dissenters to today’s interest rate decision, with Beth Hammack, Neel Kashkari, and Lorie Logan calling for a +0.25% hike.

Awaiting Kevin Warsh in the press conference was a flurry of questions intended to garner justification for the hold. While Warsh stated on several occasions the Fed’s unwillingness to accept inflation above the 2% target, and that today’s decision was not driven by “inertia,” he was challenged in delivering a well-articulated rationale as to why the Fed chose to forgo a hike. Instead, he stated on multiple occasions that the Fed would not hesitate to act should inflation remain elevated – which sounded a bit like the forward guidance Warsh has committed to avoid. In addition, he acknowledged the rise in yields since the June meeting and repeatedly pointed to recent market activity as evidence that the Fed may not need to intervene at this time. Finally, he voiced his view that the “central bank need not always and everywhere be the center of attention,” and that “monetary policy matters by how it affects the real economy.”

As we look ahead to Jackson Hole and the September meeting, core CPI remains higher than the Fed’s +2% target and has now been above that level for over five years on a year-over-year basis. While the decision was made to keep rates steady for this meeting, the persistence of above trend inflation combined with a stabilized labor market continues to pressure rate expectations higher. In addition, re-escalation in the Middle East, potential for new tariffs, and AI infrastructure build could all translate to supply side price increases – which are more challenging for monetary policy to offset, particularly given the lack of predictability on the timing and magnitude of the transmission to the broader economy.

U.S. equity and bond markets reflected the lack of clarity and perhaps confidence in Warsh’s comments, as short term yields fell, long term yields rose, and equities traded lower after a short rally during the press conference. While the probability of a September rate hike now stand at more than 70% according to CME FedWatch, there are several notable data releases slated between now and then, and with Warsh’s new task forces focused on a wide swath of public and private economic and market data, we anticipate we could see volatility in rate expectations and the broader markets as we get closer to the September meeting.

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