Federal Reserve holds interest rates steady for fourth time this year

Kevin Warsh, the new Federal Reserve chair. Photograph: Evelyn Hockstein/Reuters View image in fullscreen Kevin Warsh, the new Federal Reserve chair. Photograph: Evelyn Hockstein/Reuters Federal Reserve holds interest rates steady for fourth time this year Open markets committee says ‘economic activity is expanding at a solid pace’ in first meeting under new chair Kevin Warsh The US Federal Reserve left interest rates unchanged for the fourth time this year after its first meeting under new chair, Kevin Warsh, a Donald Trump appointee who has taken over the central bank during a tumultuous time for the US economy. “Economic activity is expanding at a solid pace despite elevated uncertainty that owes, in part, to the conflict in the Middle East,” the Fed’s open market committee said in a short statement. “Productivity growth and capital investment are strong. Job gains have kept pace with the workforce, and the unemployment rate has changed little.” The Fed was widely expected to keep rates at a range of 3.5% to 3.75%, where it has remained since December. The decision was unanimously supported by the Fed’s voting committee. The committee’s monthly policy statement was notably shorter compared to previous statements. The statement acknowledged that “inflation remains elevated relative to the committee’s 2% goal, in part reflecting supply shocks that have driven price increases in certain sectors, including energy”, and said the central bank “will deliver price stability”. The Fed released a slate of projections illustrating when individual officials predict rate changes will occur. Nine members projected at least one rate increase this year. Warsh confirmed he was the sole board member who did not contribute to the projections. The projections mark a U-turn in outlook from just a few months ago: the last time Fed released projections, in March, 12 of the 19 officials projected at least one rate cut by the end of this year. Warsh begins his four-year term as chair at a time when the US economy has been rattled by heightened inflation and geopolitical uncertainty. A sharp spike in energy prices caused by the war in the Middle East has pushed inflation to 4.2% – the highest level the US has seen since 2023 and far from the Fed’s 2% target. Though the announcement of a ceasefire deal between the US and Iran sent oil prices tumbling to a three-month low, it will likely take months for energy prices to return to prewar levels. Meanwhile, hourly earnings dropped to a seasonally adjusted 0.7%, indicating that price increases have stripped out wage gains over the past year. But it’s unclear whether higher inflation will ever convince a majority of the Fed’s 12 voting members to call for a rate increase. Core inflation, which strips out volatile food and energy prices, has increased only mildly, to 2.9% from the year prior. The country’s labor market has also remained relatively strong, with the unemployment rate holding steady at 4.3%. Even as Americans co