The Federal Reserve held interest rates steady on Wednesday, a choice that may intensify questions about how US central bank chief Kevin Warsh will deliver on his commitment to bring inflation back down to the 2 per cent target.
The widely expected decision to leave the benchmark interest rate in the 3.50 per cent to 3.75 per cent range drew dissents from three of the 12 members of the policy-setting Federal Open Market Committee who “preferred” a quarter-percentage-point hike at this meeting.
Those same three, the presidents of the Fed’s Cleveland, Dallas and Minneapolis regional banks, had also dissented at Jerome Powell’s final meeting as central bank chief in late April, that time in favour of removing the implied promise of lower rates.
Warsh, who took over as head of the Fed in May, has said he has “no tolerance” for inflation that has been running above the central bank’s target for more than five years, and up until last month was accelerating as the war in the Middle East pushed up global fuel and food prices, and investment in data centres and other spending tied to artificial intelligence drove up demand.
“Inflation remains elevated relative to the committee’s 2 per cent goal,” the Fed said in a short policy statement after the end of its latest two-day meeting. It replicated word for word all of the June 17 statement’s assessment of the economy.
The Fed said economic activity is “expanding at a solid pace”, noting, as it did in June, that job gains “have kept pace with the workforce, and the unemployment rate has changed little”.