Federal Reserve policymakers have voted to leave interest rates steady, despite growing concerns about inflation that prompted several officials to dissent in favor of a rate hike.
Fed Chairman Kevin Warsh joined the majority on the 12-member Federal Open Market Committee in the 9-3 vote in favor of leaving the federal funds rate unchanged at Wednesday’s meeting in Washington, DC.
Dissenting were Cleveland Fed President Beth Hammack, Dallas Fed President Lorie Logan, and Minneapolis Fed President Neel Kashkari, who all voted in favor of raising the overnight rate by a quarter percentage point.
Seen as the FOMC’s most hawkish members on inflation, Hammack and Logan have voiced concerns that inflation is a rising threat that needs to be quickly brought to heel to protect consumers.
The decision marks the first time in years that the outcome of the FOMC policy decision was in question. Leading up to the vote, financial markets estimated a roughly one-in-three chance that the Fed would hike rates, underlining the dramatic shift from earlier this year, when markets were expecting rate cuts in 2026.
The decision leaves the Fed’s benchmark overnight rate unchanged in a range of 3.5% to 3.75%, where it has stood since December. After cutting rates three times last fall, the Fed paused at January’s meeting, as concern shifted from the labor market toward the inflation picture.
The Fed uses higher interest rates to fight inflation and lower rates to stimulate the job market, in line with the central bank’s dual mandate of price stability and maximum employment.
Markets now view a Fed rate hike this year as inevitable, with the only question being exactly how much interest rates will rise by December.
For homebuyers, it means that mortgage rates could remain stuck around their current range near 6.5% in the short term, and may march even higher if inflation continues to spiral.
The Fed doesn’t directly control mortgage rates, which are instead set by lenders in the free market. But mortgage rates are sensitive to inflation and market expectations for future Fed policy, making interest rate decisions key for homebuyers.
Last week, mortgage rates averaged 6.58%, according to Freddie Mac. That’s the highest in nearly a year, and mortgage rates have been climbing steadily since the war with Iran began, disrupting global oil markets.
Developing story, more to follow.
Keith Griffith is a senior news editor at Realtor.com covering housing policy, real estate news, and trends in the residential market. Previously, his work has appeared in Business Insider, The Street, Chicago Sun-Times, New York Post, and Daily Mail, among other publications. He has a master’s degree in economic and business journalism from Columbia University.
