Federal Reserve holds interest rates steady for fourth time this year

US central bank makes decision in first meeting under new chair and Trump appointee Kevin Warsh

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.