Fed holds interest rates steady in Warsh's first meeting, with more officials projecting hikes this year

The Federal Reserve held interest rates steady on Wednesday for the fourth consecutive policy meeting this year. Central bank officials signaled that they're looking to hold rates steady — but are close to hiking rates once.

The central bank voted in a unanimous decision — the first since last June — to hold its benchmark interest rate in the range of 3.5% to 3.75%.

In a close call, Fed officials see holding rates or possibly hiking once this year before cutting once again next year. The shift comes after policymakers projected one 2026 rate cut in March, but the job market has firmed and inflation has risen to the highest level in three years, pushed up by higher energy prices from the conflict in the Middle East.

Only 18 officials of the Fed's 19-member Federal Open Market Committee submitted interest rate projections. One member declined to submit projections. This year, eight officials see holding rates steady, three officials see one rate hike, five see two rate hikes, and one sees four hikes.

The Fed dramatically shortened its policy statement and dropped language signaling that its next move would be a rate cut.

The language previously stated that "in considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks."

In the new statement, officials noted that the economy is expanding at a "solid" pace despite elevated uncertainty, in part due to the conflict in the Middle East. They said that inflation remains elevated, in part reflecting supply shocks that have driven up price increases in certain sectors, including energy.

"The committee will deliver price stability," officials said in their statement

Inflation is now seen rising 3.6%, compared with 2.7% previously, on a headline basis. On a "core" basis, officials see inflation at 3.3%, compared with 2.7% previously.

The Consumer Price Index rose 4.2% in May, reaching the highest level in three years, driven largely by higher energy prices. Stripping out volatile energy and food prices, "core" inflation ticked up to 2.9% from 2.8% in April, nearly a full percentage point above the Fed's 2% target.

The Fed's preferred inflation gauge, the Personal Consumption Expenditures index, is worse, showing higher "core" inflation of 3.3% in April with expectations for it to rise to 3.5% for May.

The Fed expects lower GDP this year, by 0.2% to 2.2% vs. 2.4% before. The unemployment rate is seen holding steady at 4.3%, down from 4.4% previously.


This is Kevin Warsh's first meeting as chair, following a rocky confirmation process that saw him in place just in time. He is scheduled to hold a press conference at 2:30 p.m. ET.

https://finance.yahoo.com/economy/policy/article/fed-holds-interest-rates-steady-in-warshs-first-meeting-with-more-officials-projecting-hikes-this-year-140000745.html