Federal funds rate remains between 3.5% – 3.75%.

The US Federal Reserve kept its benchmark interest rate unchanged Wednesday as three policymakers voted in favor of a quarter-point increase.

The Federal Open Market Committee maintained the federal funds rate target range between 3.5% and 3.75% in a 9-3 vote.

Beth Hammack, Neel Kashkari and Lorie Logan opposed keeping the rate unchanged, preferring to raise the target range 25 basis points at the meeting.

The Fed said economic activity continued to expand at a solid pace despite heightened uncertainty partly stemming from the war in the Middle East.

Productivity growth and capital investment remained strong, while job gains kept pace with labor force growth and the unemployment rate changed little, it added.

The central bank said inflation remained above its 2% target, partly due to supply shocks that pushed up prices in some sectors, including energy.

In June, US annual consumer inflation eased to 3.5% from 4.2% in May, below expectations, as energy prices fell 5.7% during the month, more than offsetting increases in food and shelter costs.

The Consumer Price Index (CPI) fell 0.4% in June from the previous month after rising 0.5% in May, marking its first monthly decline in six years and the steepest monthly decrease since April 2020.

Meanwhile, the US economy added 57,000 jobs in June, much less than estimates, while the unemployment rate was down to 4.2% from 4.3%.

The Fed said it would continue its policy of maintaining ample reserves in the banking system.

As in June, the statement added: “The Committee will deliver price stability.”

Officials favoring tighter policy have argued that persistent inflation continues to burden households, with recent price pressures reflecting tariffs imposed by President Donald Trump and higher energy costs linked to the war with Iran.

Fed officials’ projections released in June indicated a one-quarter-percentage-point rate increase by the end of 2026.