Fed holds rates steady, signals possible hike before year end
10 reported2 unconfirmed
The Federal Reserve left interest rates unchanged at a range of 3.5% to 3.75% on Wednesday, a decision unanimously supported by its voting committee, while signaling a possible rate hike before the end of the year. US stock markets dropped after the announcement, with the Dow closing 500 points lower and the S&P 500 and Nasdaq each down over 1.2%. The Fed’s statement noted that “economic activity is expanding at a solid pace despite elevated uncertainty” partly due to the conflict in the Middle East, and acknowledged that “inflation remains elevated relative to the committee’s 2% goal.” This was the first meeting overseen by new Fed Chair Kevin Warsh, who took over in May and announced plans to create five taskforces to assess monetary policy, including communications. The Fed also released projections showing nine members anticipate at least one rate increase this year, a shift from March when 12 of 19 officials projected at least one rate cut by year’s end. Warsh emphasized that monetary policy “cannot have a very significant effect on particularly prices,” and declined to answer whether he had met with President Trump since starting his term.
What’s reported
The Fed left rates unchanged at 3.5% to 3.75%, where they have been since December.
The decision was unanimously supported by the Fed’s voting committee.
The Dow closed 500 points lower; S&P 500 and Nasdaq fell over 1.2% each.
The Fed’s statement cited “elevated uncertainty” due to the conflict in the Middle East.
Inflation is at 4.2%, the highest since 2023, far from the Fed’s 2% target.
Nine members projected at least one rate increase this year; in March, 12 projected at least one cut.
Kevin Warsh took over as Fed chair in May and announced five new taskforces to assess monetary policy.
Warsh said monetary policy “cannot have a very significant effect on particularly prices.”
Warsh declined to answer whether he had met with President Trump since starting his term.
Former Chair Jerome Powell warned that politicizing the Fed could permanently damage trust in the central bank.
Open questions
Whether higher inflation will convince a majority of the Fed’s 12 voting members to call for a rate increase.
Whether Warsh has met with President Trump since starting his term.
Key figures
Kevin Warsh, Fed chair (took over in May)
Jerome Powell, former Fed chair
Donald Trump, US president
Sources: The Guardian
