- Decision
- Maintain
- Rate change
- 0 bps
- federal funds rate
- 4.5%
The Federal Open Market Committee kept the federal funds target range unchanged at 4.25–4.50 percent in its 7 May decision, pointing to solid economic expansion, a low and stable unemployment rate and still-elevated inflation amid greater uncertainty and rising risks to both higher unemployment and higher prices. The range has been on hold since at least January 2025. To implement the stance, the Federal Reserve will pay 4.40 percent on reserve balances, aim to maintain the funds rate within the target band through open-market operations, run overnight repo and reverse repo facilities at 4.50 percent and 4.25 percent respectively (with USD500 bn and USD160 bn limits), and continue balance-sheet run-off by rolling over Treasuries above a USD5 bn monthly cap while reinvesting agency MBS pay-downs exceeding USD35 bn. Domestic data show robust activity and firm labour market conditions, but inflation remains above the 2 percent goal and recent net-export swings have clouded the outlook. The Committee reiterated it will assess incoming data and stands ready to adjust policy if evolving risks threaten progress toward its employment and inflation objectives.
Rate evolution
From June 2025 to September 2026, the Federal Reserve lowered the target range for the federal funds rate by a net 50 basis points, from 4-1/4 to 4-1/2 percent to 3-3/4 to 4 percent, after holding steady through mid-2025, cutting over September to December, pausing through July 2026 and raising the range in September. The initial holds reflected activity that was still expanding, a low unemployment rate and solid labor market conditions, alongside inflation that remained somewhat elevated, while uncertainty had diminished somewhat in June but was still elevated and risks were seen on both sides of the dual mandate. Cuts began as growth moderated, job gains slowed, unemployment edged up and the Committee judged downside risks to employment had risen, even though inflation had moved up and remained somewhat elevated, with the late-2025 easing accompanied by dissents both for larger cuts and for no change.
The Committee kept the federal funds rate unchanged in April, June and July 2026 as activity expanded at a solid pace, unemployment changed little and inflation remained elevated. April cited higher global energy prices, while June and July pointed to supply shocks that drove price increases in certain sectors, including energy, and highlighted strong productivity growth, capital investment and job gains that kept pace with the workforce, while linking elevated uncertainty in part to the conflict in the Middle East. After three members dissented in July in favor of a 1/4 percentage point increase, the Committee unanimously raised the target range by that amount on September 16, citing resilient domestic spending, strong productivity growth, robust capital investment and elevated inflation, and said the action would support a timelier return to its 2 percent goal.