All talk and no hike

Marketing communication 29 July 2026

All talk and no hike FOMC Post-Meeting Comment July 2026

RaboResearch Global Economics & Markets knowledge.rabobank.com Summary  Today’s FOMC meeting was all talk and no action. Warsh stressed his commitment to the 2% Philip Marey inflation target, but all he had to offer was confidence in his team and task forces and that Senior US Strategist they are asking the right questions. However, he had no answers yet and there was no policy action.  However, his "family fight" led to three dissents in favor of a hike, which suggests that the case for a rate hike is gaining support in the Committee. This means that speculation about a hike will resurge in the coming weeks.  We still think that the most likely outcome is that the Fed remains on hold through 2026. We expect the FOMC to talk extensively about the case for rate hikes, while ultimately refraining from taking action.  However, the three dissents today indicate that the risk of a hike in the coming months has increased.

Introduction Market speculation had been building that we could see a surprise hike from the FOMC today, but the Committee was not ready yet. As expected, the FOMC kept the target range for the federal funds rate unchanged at 3.50-3.75% at the July 28-29 meeting. However, the “family fight” led to three dissents in favor of a hike, showing that the case for a hike is gaining support in the FOMC. The FOMC statement – apart from the dissents – was largely identical to last month’s, including the now superfluous reaffirmation of the policy of maintaining ample reserves in the banking system. While his first press conference last month gave Warsh’s inflation fighting credentials a boost, the second one today may have reversed this.

Press conference During the press conference Warsh talked a lot about the FOMC’s commitment to the 2% inflation target, but given the lack of action at this meeting, his message seemed to confuse the room. One reporter actually asked “What are you waiting for?” and another asked “What was the news today?”.

In his prepared speech, Warsh explained that the FOMC meeting focused on four questions: the implications of the five years of inflation overshooting, the supply shocks of the last years, the price increases from these shocks, and the effectiveness of monetary policy tools. Warsh expressed increased confidence in his team and was enthusiastic about the task forces.

Warsh said the economy showed impressive resilience. He noted the strong growth in business investment related to AI and the rise in nominal and real yields. He said that the effects of the AI boom on the supply side were hard to predict and that markets are now responding to the data rather than the Fed. As he put it: “They are now learning to play the ball not the referee.”

1/7 RaboResearch | All talk and no hike | 29-07-2026, 23:48 Please note the disclaimer at the end of this document.

During the Q&A, Warsh said they try to get the unfiltered message from the markets by not interfering. He said that there was a material tightening in nominal and real rates, so the bond markets are saying the same as the FOMC, that the economy is strong. Warsh said that forward guidance could be useful in a crisis, but not in normal circumstances. The objective is not to surprise the markets, but he did not want them to be echoing what the Fed is telling them. Still, we would like to note that while Warsh is not giving forward guidance, several FOMC participants did make speeches in the intermeeting period. So his claim that markets are now unfiltered seems a bit premature.

Warsh said that the mild CPI figures for June did not have much impact on today’s decision, because the trend in the data is more important than one data point. When asked about the 2% inflation target, Warsh subscribed to the PCE as laid down in January’s strategy document, but said that the task forces might have something to add. Meanwhile, he’ll be looking at more measures – to understand underlying trends – in order to achieve this target. On the monetary transmission mechanism, Warsh does not believe that there is necessarily a trade-off between the two parts of the dual…