Fed Holds Rates Steady as Policymakers See Hikes Ahead

Nearly half of Federal Reserve policymakers have lost confidence that stable borrowing costs will be sufficient to bring inflation down to the 2% target, driven by the sharp rise in oil prices following the war with Iran.

New forecasts show that nine of the 19 members of the US central bank expect interest rates will need to rise this year. Three months ago, no one held this view. The Fed has decided for now to keep rates in the range of 3.50%–3.75%. Six members are calling for an increase of more than a quarter of a percentage point, eight want rates to remain unchanged and only one has proposed a cut.

This shift poses a challenge for the new Fed chair, Kevin Warsh, whom Donald Trump nominated with the expectation of monetary easing. Although oil prices fell following the announcement of a deal to end the conflict between the US and Iran, the restoration of damaged energy facilities and exports through the Strait of Hormuz remains uncertain.

(Reuters, Max)