WASHINGTON — The Federal Reserve kept its key interest rate unchanged on Wednesday despite persistently high inflation and soaring energy prices due to the Iran war.
After two days of deliberation, the Federal Reserve’s interest rate setting committee made a decision with a 9-3 result. This is the fifth consecutive meeting to maintain the benchmark interest rate at around 3.6%.
Cleveland Fed President Beth Hammack opposed a 25 basis point rate increase. Neel Kashkari, president of the Minneapolis Fed; and Lorie Logan, president of the Dallas Fed.
In response to the objections, Fed Chairman Kevin Warsh told reporters at a news conference after the Fed’s announcement, “I asked for a good family fight, and I got it.”
Inflation has remained above the central bank’s 2% target for more than five years. this Iran war creates uncertainty about economic outlook It has also pushed up energy prices, intensified inflationary pressures and put policymakers at the Federal Reserve in a difficult position. Hammack, Kashkari and Logan have previously called or said they were willing to raise interest rates in response to high oil prices.
Warsh, who is chairing the second meeting of the Fed’s rate-setting committee, declared that he “cannot tolerate” rising inflation. He was appointed by President Donald Trump, who has put intense pressure on the Fed to cut interest rates rather than raise them.
Warsh said the reduction in the central bank’s forward guidance may have played a role as markets reacted to actual economic data between the last two Fed meetings. The market is “learning how to play, not how to play with the referees,” Wash said. The new Fed chair criticized his predecessor for making markets too reliant on the Fed’s signals about the direction of interest rates.
While Wall Street traders put a 33% chance that the Federal Reserve will raise interest rates on Wednesday to curb inflation, most expect policymakers to hold off on raising rates, unwilling to risk upsetting financial markets. But 76% expect a rate hike in September. A month ago, only 59% of traders expected a rate hike in September, according to CME data.
Fed officials may want to see more economic data before changing interest rates. On Thursday, the U.S. Commerce Department will release economic growth from April to June for the first time, and will also release the Federal Reserve’s preferred inflation measure – the personal consumption expenditures price index – in June.
Rising risks add uncertainty to Fed’s decision-making process violence in iran. Oil price in brief Breaking above $100 The fighting intensified last week. It has since hoped that the United States and Iran can find some way to ease tensions.
Earlier on Wednesday, however, Jordan intercepted a missile fired from Iran, just hours after the U.S. military said it had shot down another Iranian attack on U.S. forces in the Middle East. end short pause in combat.
After the U.S. and Israeli attacks on February 28, Iran closed the Strait of Hormuz – through which one-fifth of the world’s oil and natural gas passes. This caused the worst oil supply disruption in history and sent energy prices soaring. Prices have since fluctuated based on changing conflict conditions and negotiations to de-escalate the conflict, but the average cost per barrel today is $10 to $15 higher than this time last year.
Inflation has exceeded the Fed’s 2% target since early 2021, when the U.S. economy overheated as it recovered from COVID-19 lockdowns. Inflation peaked at just over 9% in mid-2022 and began to decline after the Federal Reserve raised interest rates 11 times in 2022 and 2023. But progress has more or less stalled.
In addition to the Iran war, other factors adding to inflationary pressures include President Donald Trump’s tariffs on foreign goods and a surge in commodity prices. Investing in data centers to power artificial intelligencewhich drives up the cost of computer chips, equipment and electricity.
So-called core inflation – which excludes volatile food and energy prices – June cools downThat’s partly because apartment rents aren’t rising as fast as they once were. A temporary drop in gasoline prices last month also helped keep headline inflation in check.
But several Fed policymakers have been arguing that the Fed must raise interest rates to get inflation back to its 2% target.
Christopher Waller, an influential member of the Federal Reserve Board of Governors, said in a speech this month that “staring hard at inflation until it melts before our eclipsed gaze is not an option.”
This article was generated from automated news agency feeds without modifications to the text.
