Topline
The Federal Reserve on Wednesday voted to keep interest rates unchanged, even as central bank officials appear divided over how to approach policy amid persistent inflation concerns.
Key Facts
The Federal Open Market Committee voted 9-3 to hold interest rates between 3.5% and 3.75%, with Dallas Fed president Lorie Logan, Minneapolis Fed president Neel Kashkari and Cleveland Fed president Beth Hammack each dissenting.
That marks a reversal from last month’s unanimous vote to keep interest rates within their current range.
The FOMC’s statement—nearly identical to its June release, which was about one-third the length of announcements under former Fed Chair Jerome Powell—appeared upbeat about the economy, noting activity was “expanding at a solid pace” despite conflict in the Middle East, and that “job gains have kept pace with the workforce.”
what has kevin warsh said about interest rates?
Warsh, who has been noncommittal on the near-term path of interest rates, said central bank officials have “no tolerance for persistently elevated inflation.” He said the Fed has a “resolute commitment to restoring price stability” and said getting inflation under control is its foremost objective. Other Fed officials have leaned toward raising rates: Logan earlier this month said she believed interest rates should be “modestly” higher, while Hammack, Kashkari and Fed Governor Christopher Waller have each signaled support for tighter monetary policy ahead of Wednesday’s vote. There appeared to be division over how the central bank’s policy rate shifted through the year, as “many” participants in the FOMC’s June meeting said interest rates would be “within or slightly below” their current range by the end of the year, even as “many other” participants assessed that interest rates would be higher.
will the federal reserve cut interest rates this year?
Likely not. In the FOMC’s June meeting, officials expected no changes to interest rates until a cut in Q2 2027. Bank of America analysts wrote in a note earlier this week that they expect three quarter-point rate hikes this year, potentially raising interest rates to between 4.25% and 4.5%, citing rising oil prices that have pushed inflation to multiyear highs.
key background
Federal Reserve officials have cited rising inflation amid the Iran war as a reason to keep interest rates unchanged in recent months. The central bank’s preferred inflation reading, core consumption expenditures index data, rose at its fastest rate in nearly three years in May, matching similarly high consumption price index data. Inflation briefly cooled in June during a brief peace deal between Iran and the U.S. that resulted in lower oil prices and the largest month-to-month decline in consumer prices since April 2020. Warsh, in prepared remarks to Congress earlier this year, pledged the central bank would “get monetary policy right” and said, “the inflation surge of the last five years will be a thing of the past.”