Fed Holds Rates Despite Three Dissents

The US Federal Reserve on Wednesday left its benchmark interest rate unchanged at 3.50%–3.75%, as expected. However, the decision raised questions about how new Federal Reserve Chair Kevin Warsh plans to return inflation to the central bank's 2% target.

Three of the 12 members of the Federal Open Market Committee voted against holding rates steady. The dissenters, the presidents of the Cleveland, Dallas and Minneapolis Federal Reserve Banks, backed a quarter-percentage-point rate increase.

In a statement, the Fed said inflation remains above its 2% target while economic activity continues to expand at a solid pace. It added that job growth is keeping pace with labor force growth and that the unemployment rate has remained broadly unchanged.

Warsh, who became Fed chair in May, has said he has no tolerance for elevated inflation. Recent price pressures have been driven by the war in the Middle East, higher global fuel and food prices, and investment in data centers and other AI-related projects that has boosted demand.

Financial markets now see a September rate hike as almost certain.

(Reuters, luc)