Dow Plummets After Fed Keeps Interest Rates Steady

As expected, The Federal Reserve (FOMC) opted to hold rates steady by a 9–3 vote. But there appears to be growing dissent and talk of a future rate hike.

Investors did not like the decision, and the Dow dropped more than 1,150 points between the announcement and the closing bell. It was the worst day for the Dow since April of 2025.

The Committee decided to maintain the target range for the federal funds rate at 3-1/2 to 3-3/4 percent, in support of the Federal Reserve's dual mandate. The Committee is continuing its policy of maintaining ample reserves in the banking system.

Federal Reserve Chairman Kevin Warsh did not signal what's ahead at the next meeting in September, but praised the overall economy. "The economy is showing impressive resilience," he said. "Even with recent shocks, the trends are positive and reveal solid growth. Job gains have kept pace with the workforce, and the unemployment rate has changed little."

Still, Warsh acknowledged the elephant in the room. "Inflation remains elevated, relative to the committee's two percent goal," he said.

However, core inflation and wholesale prices both fell substantially last month, so the Fed will be watching to see what happens over the next two months.

Voting against the monetary policy action were Beth M. Hammack, Neel Kashkari, and Lorie K. Logan, who preferred to raise the target range for the federal funds rate by 1/4 percentage point at this meeting.