Fed holds rates at 3.5%-3.75% for fifth straight meeting, Dow tumbles over 1,100 points
The Federal Reserve held the federal funds rate target range at 3.5%-3.75% for a fifth consecutive meeting, with the last rate cut having been in December 2025. The decision was carried by a 9-3 vote, with dissenters Hammack, Kashkari and Logan favouring a quarter-point increase. The policy statement noted robust economic expansion and employment growth, while inflation remained elevated partly because of supply shocks. US equities slid sharply: the Dow lost more than 1,100 points. The dollar index dropped below 101, spot gold briefly topped $4,100, and the 30-year Treasury yield surged above 5.2% to its highest since 2007, even as the policy-sensitive two-year yield declined.
This marks the Federal Reserve's fifth consecutive meeting holding rates unchanged; the most recent rate cut occurred in December 2025. The Federal Open Market Committee voted 9 to 3 to approve the decision. Dissenting members Beth Hammack, Neel Kashkari and Lorie Logan preferred to raise the federal funds rate target range by 25 basis points at this meeting.
In its statement, the Federal Reserve said that despite elevated uncertainty, partly stemming from the Middle East conflict, economic activity has continued to expand at a solid pace, with robust productivity growth and capital investment. Employment gains have moved in step with the expansion of the labour force, and the unemployment rate has been little changed. Relative to the Committee's 2% inflation objective, inflation remains elevated, partly because supply shocks have pushed up prices in some sectors, including energy. The Committee remains strongly committed to achieving its price stability goal.
Fed Chair Warsh said at the press conference that the decision to leave rates unchanged this time was the beginning, not the end, of the policy process. He noted that the policy statement only objectively sets out the facts and does not make forecasts, a choice that is especially prudent in the current environment of high uncertainty. Warsh reaffirmed the Fed's determination to bring inflation under control, while acknowledging that the path to taming inflation is difficult and cannot be accomplished overnight. The statement included neither forward guidance nor any indication of the Fed's policy reaction framework.
US stocks plunged in late trading. At the close, the Dow fell more than 1,100 points, or 2.19%, the Nasdaq dropped 1.74%, and the S&P 500 lost 1.52%. Large-cap technology stocks broadly declined: Nvidia fell 3.55%, Tesla 2.97%, and Amazon 1.82%. Optical communications and memory storage sectors continued to fall sharply, with Micron Technology down nearly 10% and Kioxia ADR down more than 9%. Chinese ADRs bucked the trend, with the Nasdaq Golden Dragon China Index rising 1.73%; Li Auto gained over 4% and PDD Holdings rose over 3%.
The US dollar index tumbled, breaking below the 101 level. International gold prices rose, with spot gold briefly topping $4,100. On the long end of the Treasury yield curve, yields soared, with the 30-year yield breaking above 5.2%, its highest since 2007. The policy-sensitive 2-year Treasury yield declined.