After what Warsh promised would be a good ‘family fight,’ the Federal Reserve makes its fifth rate call of 2026
Despite growing speculation that elevated energy costs and a hawkish Federal Reserve could push the central bank toward a rate hike, the Fed opted to hold steady once again on Wednesday.
The Federal Open Market Committee concluded its July meeting by announcing it would hold the federal funds rate steady between 3.50% and 3.75%, marking the fifth consecutive meeting without a change to the benchmark rate.
The vote was 9-3, with Beth M. Hammack, Neel Kashkari, and Lorie K. Logan voting to raise the Fed funds rate by 25 basis points.
Heading into the meeting, renewed oil price pressure tied to hostilities in the Middle East had pushed inflation expectations higher and led some market participants to price in a chance of a hike.
LIVE: Follow along with our live blog for the latest news on Fed decision day
The decision came against a backdrop of 30-year fixed mortgage rates climbing to 11-month highs, with Freddie Mac reporting its 30-year rate at 6.58% last Thursday.
Sam Williamson, senior economist at First American, had said ahead of the meeting that the risks heading in had shifted enough to keep a hike on the table.
"A hold remains the most likely outcome at the July meeting, but a hike is not completely off the table," Williamson told Mortgage Professional America ahead of the decision. "Rising inflation expectations, renewed energy pressures and a more hawkish Fed have made that risk harder to ignore. If the Fed holds, the question becomes how much the balance of risks has shifted toward fighting inflation — a signal that could raise the odds of rate hikes later this year."
Watching Warsh’s press conference
The press conference, scheduled for 2:30 p.m. ET, will reveal how Chair Kevin Warsh frames the committee's thinking on inflation, the energy shock, and the path ahead, including whether he signals a willingness to act if energy-driven inflation spreads into broader prices.
Melissa Cohn, regional vice president of William Raveis Mortgage and a 44-year mortgage veteran, said she was watching Warsh's tone as closely as the rate decision itself.
"We all, in our hearts, pray that we hear something from the Fed saying that it's found a new way to tame inflation and lower rates, but that's just not the reality," Cohn said. "What I'm really looking to see is just how hawkish Warsh is, and because it's his second meeting and press conference, if there's more transparency. It'll be interesting to see how he's going to choose to continue to communicate to the general public."
Warsh has been explicit about his skepticism of forward guidance, the practice of telegraphing future rate moves. Williamson said that shift has direct implications for mortgage rate volatility, since a CPI print, an employment report, or a Fed governor's speech can now move rates in ways that would previously have been dampened by explicit guidance.
"Less forward guidance puts more weight on incoming economic data, potentially increasing volatility in Treasury yields and mortgage rates as each new inflation or employment report arrives," he said. "Even so, economists will still have plenty of inter-meeting signals to interpret from Fed speeches, public appearances and meeting minutes."
What brokers should watch now
For brokers, the near-term picture has not changed much. The central question is whether the oil-driven inflation bleeds into broader prices, and Williamson said that is the threshold the committee would need to cross before acting.
"A sustained energy shock would complicate the Fed's dual mandate by keeping pressure on inflation, while weakening household purchasing power and posing downside risks to growth," he said. "With the labor market still stable, inflation is likely to remain the Fed's more immediate concern, but policymakers would probably need definitive evidence that higher energy costs were starting to spread into broader prices before raising rates."
Williamson said the outlook, while uncertain, is not without a silver lining for brokers.
"While higher rates can weigh on home sales, the silver lining is that the market does not need a return to ultra-low rates to continue healing," he said. "Slower house-price growth, rising incomes, more inventory and a gradually easing lock-in effect can improve affordability and support a broader thaw, even if mortgage rates remain elevated."
Stay updated with the freshest mortgage news. Get exclusive interviews, breaking news, and industry events in your inbox, and always be the first to know by subscribing to our FREE daily newsletter.
