Federal Reserve Keeps Benchmark Rate at 3.50%–3.75% as Inflation Remains Sticky and Jobs Show Mixed Signals

The Federal Open Market Committee voted to keep the federal funds target range unchanged, a deliberate pause that reflects competing signals from inflation and the labor market. Core price measures remain elevated relative to the Fed’s 2% objective, and while staff projections show a gradual move toward that goal, officials emphasized patience to ensure inflation durability. Labor-market indicators have softened: monthly payroll gains have run well below earlier norms, recently adding roughly 50,000 jobs in the latest month while the unemployment rate edged down modestly to 4.4 percent. The committee’s split—two members formally seeking a 25 basis-point cut—underscores internal debate about how quickly to ease given weak hiring and fragile household finances. Consumer sentiment plunged to its lowest reading in more than a decade, pointing to downside demand risks that could amplify the effects of sustained restrictive policy. Beyond the near-term data, institutional dynamics are also shaping the outlook: several rotating regional bank presidents will join the voting panel this year and have leaned toward caution on inflation, and the upcoming change in the Fed’s leadership timeline adds an extra layer of uncertainty. Market pricing has adjusted to these forces — fed-funds futures have nudged an expected first cut later in the summer rather than in early summer, and the dollar has softened amid shifting rate expectations — which together constrain the scope for quick policy easing. Officials framed the decision as keeping options open: maintaining restrictive policy to press on inflation while remaining ready to ease if labor weakness intensifies. For businesses and investors, the decision preserves current borrowing costs and raises the importance of incoming employment and inflation prints, as well as Fed communications and governance developments, in shaping the timing of any future rate relief. Overall, the Fed’s posture is one of calibrated restraint, balancing the risk that premature easing could reignite price pressures against the risk that prolonged tightness will further weaken demand and hiring.