Three Fed policymakers dissented in favor of a rate hike on Wednesday, fueling speculation about internal debate as inflation pressures persist.
RBC Economics strategists wrote, "As the Fed heads into the second half of the year...
we expect (it) will be faced with the reality of inflation as a persistent issue."
The rate hold offers the Fed time to review inflation data before the next meeting, but the likelihood of a hike in September has risen to 65.2% from 57.3% a week ago, per CME FedWatch.
Brian Jacobsen, chief economic strategist at Annex Wealth Management, commented, "It is folly to hike rates in the face of a supply-shock-bout of inflation."
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He noted that rate hikes typically address demand-driven inflation, but current inflation is driven mainly by potential oil supply constraints due to disruptions in the Strait of Hormuz and attacks on alternative shipping routes.
