Fed Holds Interest Rates Steady, US Inflation Remains Key Consideration

JAKARTA – The United States Federal Reserve (The Fed) decided to maintain its benchmark interest rate in the range of 3.5-3.75 per cent at its Federal Open Market Committee (FOMC) meeting on Wednesday (29/7/2026) local time. The decision was reached through a 9-3 vote, with three officials supporting a 25 basis point rate increase.

The three officials who cast dissenting votes were Beth Hammack, Neel Kashkari and Lorie Logan. They believed interest rates still needed to be raised to curb inflationary pressures.

In its statement, the Fed said US economic activity continued to grow at a solid pace despite rising uncertainty, partly due to the conflict in the Middle East.

The US central bank also assessed that productivity and capital investment remained strong, while employment growth stayed in line with the growth of the labour force. The unemployment rate was described as relatively stable.

On the other hand, inflation remains above the Fed’s 2 per cent target. According to the central bank, price pressures are influenced by supply disruptions that have driven up prices in several sectors, including energy.

In June 2026, annual US inflation fell to 3.5 per cent, down from 4.2 per cent in May. The decline was driven by a 5.7 per cent drop in energy prices, which offset increases in food and housing costs.

On a monthly basis, the Consumer Price Index (CPI) fell 0.4 per cent in June after rising 0.5 per cent in May. The decrease was the first in six years and the steepest since April 2020.

Meanwhile, the labour market is beginning to show signs of slowing. The US economy added only 57,000 jobs in June, lower than expected. The unemployment rate, meanwhile, edged down to 4.2 per cent from 4.3 per cent in the previous month.

The Fed stated it would maintain its policy of ensuring adequate reserves in the banking system. In the same statement, the central bank reiterated its commitment to maintaining price stability.