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Federal Reserve Chairman Kevin Warsh concludes a news conference after a meeting of the Federal Open Market Committee, June 17, 2026.<\/p>\n
Tom Williams | CQ-Roll Call, Inc. | Getty Images<\/p>\n<\/div>\n<\/div>\n<\/div>\n
The Federal Reserve<\/a>\u00a0is expected to hold\u00a0interest rates<\/a>\u00a0unchanged at its upcoming\u00a0July meeting\u00a0\u2014 as higher energy prices and renewed tensions with Iran have complicated the picture for Fed Chairman Kevin Warsh<\/a>, despite cooler inflation data.<\/p>\n While Warsh took over a Fed that has seen\u00a0inflation exceed its 2% target<\/a> since 2021, the\u00a0consumer price index<\/a> \u2014 a broad measure of inflation \u2014 posted an unexpected decline last month, bringing the annual inflation rate down to 3.5% in June. But in the weeks that followed, oil prices jumped again amid the escalating conflict in the Middle East.<\/p>\n Traders scaled back expectations for an interest rate hike\u00a0when the Fed meets this week, according to the CME Group’s\u00a0FedWatch\u00a0gauge<\/a>. Market pricing indicates the Fed is more likely to consider a rate move in September.<\/p>\n For Warsh, price stability remains a headwind, despite President Donald Trump’s push to bring the federal funds rate down, according to Brett House, an economics professor at Columbia Business School. “It sets up a potential conflict between Trump and the Fed, where his desire for lower interest rates is unlikely to be realized anytime soon,” he said.<\/p>\n<\/div>\n The Fed’s benchmark interest rate determines what banks charge one another for overnight loans. That rate then influences a wide range of consumer borrowing and savings rates. <\/p>\n When the Fed raises its benchmark rate, borrowing becomes more expensive, which can slow economic activity and help ease inflation. Lowering the rate tends to encourage spending and stimulate the economy, but can also contribute to rising prices.<\/p>\n Shorter-term rates are closely pegged to the\u00a0prime rate<\/a>, which is typically 3 percentage points above the fed funds rate. Longer-term rates are more dependent on\u00a0inflation<\/a>\u00a0expectations and other economic factors.<\/p>\n “Consumers need to remember that the rates that they face are not set only by the Fed. The bond market has a big hand in determining the rates consumers pay,” House said. <\/p>\n<\/div>\nHow the Fed affects your wallet<\/h2>\n