The Federal Reserve has kept interest rates steady for the fourth time this year, maintaining a range of 3.5% to 3.75%. This decision comes amid economic expansion and uncertainties related to the Middle East conflict.
Mentioned in this story
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 Fed also removed in its monthly policy statement the easing bias, which previously a signal that indicated that the central bank was looking for further opportunities to make a rate cut as their next rate change. Last month, three Fed governors dissented over the inclusion of this easing bias.
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 continue to balk at higher prices, Trump has continued to advocate for lower rates but said last week that he doesn’t “want to have a big influence” on Warsh.
“Kevin is fantastic, and I want him to do whatever he wants,” Trump said in an interview with Meet the Press on NBC News, while also reiterating his desire for a rate cut.
Before he was first nominated by Trump in January, Warsh argued for the importance of rate cuts – publicly agreeing with the president at a shaky time between the White House and the Fed.
The Federal Reserve decided to hold interest rates steady due to solid economic expansion and elevated uncertainties, particularly related to the conflict in the Middle East.
The current interest rate set by the Federal Reserve is in the range of 3.5% to 3.75%, unchanged since December.
The new chair of the Federal Reserve is Kevin Warsh, who began his four-year term during this meeting.
Factors influencing the decision include strong productivity growth, capital investment, and stable job gains, despite ongoing inflation and geopolitical uncertainties.
Los Angeles leaders are supporting an investigation into the police shooting of a two-year-old dog during a response to a noise complaint. The incident has sparked public outrage following a viral video of the dog's owner mourning her pet.
The Federal Trade Commission and four states have sued the World Professional Association for Transgender Health, alleging deceptive claims about gender-affirming care for minors. The lawsuit is part of a broader effort to limit such care under the Trump administration.
Detainees moved from Florida's Alligator Alcatraz, activists demand permanent closure and restoration.
Oklahoma congressional candidate Jackson Lahmeyer drops out amid texting scandal
Michigan pollster Steve Mitchell claims Sen. Mallory McMorrow's campaign pressured a news outlet to suppress a poll showing her trailing in the Democratic primary. The poll indicated McMorrow at 6%, significantly behind her opponents Abdul El-Sayed and Haley Stevens.
Brazil's Lula calls on Trump to avoid interfering in elections
See every story in News — including breaking news and analysis.
Warsh is likely to receive more favorable treatment from the president compared to his predecessor, Jerome Powell, who Trump repeatedly harassed for holding off on cut rates.
In January, Powell was put under a federal investigation over renovations at the Fed headquarters that went over budget, which the justice department dropped after political pressure. Powell said that the investigation was a”pretext” meant to pressure the central bank to lower rates.
When accepting the John F Kennedy Profile in Courage award earlier this month, Powell warned that politicizing the Fed could permanently damage trust in the central bank.
“The public would lose faith that the central bank will make decisions based only on what’s best for all Americans,” Powell said. “The Fed’s credibility would be lost.”