Fed Holds Rates at 3.50%-3.75% as 3 Back Hike

The Federal Reserve kept rates unchanged at 3.50%-3.75% on July 29, but three officials called for a hike. Three officials wanted a 25-basis-point hike, marking the first time since 2016 that three policymakers have opposed a Fed decision in the same direction.

The split raised the September hike odds to 62%, keeping pressure on Bitcoin and other risk assets.

Fed Vote Splits 9-3 on Rate Decision

The Federal Open Market Committee voted 9-3 to keep the federal funds rate at 3.50%-3.75%, extending the Fed’s wait for clearer signs that inflation is moving toward its 2% target.

Cleveland Fed President Beth Hammack, Minneapolis Fed President Neel Kashkari and Dallas Fed President Lorie Logan all voted for a 25-basis-point increase. The split is important because all three officials have been vocal about inflation staying too high. 

The Fed said economic activity is still expanding at a “solid pace,” while job growth has kept pace with the workforce and unemployment has changed little.

It is also the first time since September 2016 that three policymakers have dissented in the same direction.

Head of U.S. rates at BMO Capital Markets Ian Lyngen said,

“We’re reading this as a Committee with vocal hawks.” 

Warsh Gives Markets Few Clues on the Next Rate Move

Fed Chair Kevin Warsh is giving markets few clues about the Fed’s next move, as he wants policy decisions to depend on incoming economic data.

The Fed’s latest statement again stressed its focus on “price stability,” while inflation remains a concern due to tariffs and higher energy prices.

Warsh also addressed rising bond yields, saying,

We’re observing the rise in yields, trying to stay out of it.” “The Treasury market appears to be signaling many of the same things. While we have not done much over the past 42 days, the markets have done quite a bit.”

Meanwhile, the CME FedWatch Tool shows a 62% chance of a 25-basis-point rate hike in September, keeping the next Fed meeting firmly in focus.

Bitcoin Gets Relief, But ETF Outflows Continue

Bitcoin initially reacted positively to the Fed decision, rising about 1.25% to nearly $64,400 after the announcement. Meanwhile, Ethereum also moved slightly higher, trading around $1,911.

However, the crypto market still faces pressure from institutional flows. Spot Bitcoin ETFs recorded four straight days of net outflows totaling $527 million, including about $49.75 million on July 29.

That means the Fed’s decision offered some short-term relief, but investors have not fully returned to risk assets.

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