Fed Keeps Discount Rate at 3.75% as Inflation Debate Intensifies

The Federal Reserve's Board of Governors voted unanimously on July 29, 2026, to leave the primary credit (discount) rate unchanged at 3.75%, according to minutes from discount rate meetings held July 20 and July 29. The unity on the discount rate contrasted sharply with the Federal Open Market Committee's separate decision to hold the federal funds target range at 3.5%3.75%. That vote passed 93, with Governors Beth M. Hammack, Neel Kashkari, and Lorie K. Logan dissenting in favor of a 25-basis-point increase. Minutes released August 19 underscored the central fault line: inflation remains above the Fed's 2% goal. The document said "several" participants argued for a more restrictive policy stance to address persistent price pressures. Chair Kevin Warsh, in only his second meeting as chair, signaled openness to additional tightening if inflation does not cool. The Fed also kept interest on reserves at 3.65%, consistent with the decision to maintain the existing rate framework. The unchanged primary credit rate takes effect July 30, 2026. The next scheduled FOMC meeting is September 1516. Policymakers also cited geopolitical risks, with the minutes pointing to uncertainties tied to the Middle East as a complicating factor. The Fed noted that discount window rates are set by the Board of Governors separately from the FOMC's federal funds target. For markets, the 93 split is likely to keep September firmly in focus. Treasury pricing had already reflected some chance of a move at the next meeting, and the close call may reinforce those expectations. With the 3.5%3.75% range now in place long enough to anchor expectations, any shift would carry added signaling weight. A September hike would be the first tightening step of this cycle under Warsh's leadership. Between now and the September 1516 meeting, investors will see at least one more CPI release and a jobs report.