Fed rates remain unchanged but board votes are most divided since 1992

Fed rates remained unchanged on Wednesday, with the Federal Reserve keeping its policy rate steady as widely expected and pointing to rising concerns about inflation. The meeting is likely to be Jay Powell's last as chair.

The decision was the most divided since 1992. Eight officials voted to keep the federal funds rate in the 3.5%-3.75% range, while four dissented. Three objected to the Fed's bias towards easing rates, while one voted for a rate cut.

In the minutes after the decision, traders were betting there would be no rate cuts in 2026. They were also pricing in as much as a 25% chance of a rate hike over the next year, partly reflecting concerns about the inflationary impact of oil prices, which have moved above $100 a barrel again as the Iran war continues.

Investors said the split vote and the broader macroeconomic backdrop point to challenges ahead for Kevin Warsh, who is set to replace Powell as chair next month.

Markets weakened after the policy statement. The S&P 500 declined and was down 0.4% on the day. The Dow industrials fell 0.8%, while the Nasdaq Composite was down 0.4%.

Rajesh Palviya, Head of Research, Axis Direct, said, "The Federal Reserve’s decision to hold rates steady at 3.50%–3.75% reflects a central bank firmly in ‘wait-and-watch’ mode, as inflation remains stubbornly above its 2% target despite a resilient labor market. This cautious pause signals that rate cuts are not on the immediate horizon. For Indian equity markets, the pause provides measured relief, easing FPI outflow pressure, supporting rupee stability, and keeping import costs in check. However, with global rate cuts delayed, markets may stay range-bound in the near term. India's structural growth story remains strong. Medium-term investors should focus on domestic-demand-driven sectors with earnings visibility. The RBI’s rate trajectory and geopolitical developments will be the true guides for the Nifty and Sensex going forward."