The Federal Reserve kept its key interest rate unchanged on Wednesday, amid significant internal dissent and concerns about persistently high inflation. The decision, announced by Fed Chair Kevin Warsh, maintains the target range for the federal funds rate between 3.5% and 3.75%.
Three members of the Federal Open Market Committee (FOMC) voted in favor of a quarter-point rate hike, highlighting the divide within the central bank. Cleveland Fed President Beth Hammack, Minneapolis Fed President Neel Kashkari, and Dallas Fed President Lorie Logan were the dissenters.
The decision comes as the U.S. economy shows solid growth despite elevated uncertainty, partly due to the conflict in the Middle East. "Economic activity is expanding at a solid pace," the FOMC statement said, repeating language from the June meeting.
Inflation remains a concern, with the latest data showing a slight ease in June to 3.5% from 4.2% in May. However, Warsh emphasized the Fed's commitment to its 2% inflation target. "There is no soft implicit target, not on this committee's watch," Warsh said at a news conference.
President Donald Trump has been pushing for lower interest rates, but Warsh has so far resisted this pressure. Trump has called Warsh a "brilliant guy" but noted that the Fed chief would prefer lower rates.
Markets reacted nervously to the decision, with investors concerned about the impact on inflation and the potential for future rate hikes. The lack of clear guidance from the Fed has added to the uncertainty.
The Fed's next meeting is scheduled for September, and markets are expecting a possible rate hike then. However, Warsh has indicated that the central bank will continue to take a data-dependent approach to monetary policy.
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