US Federal Reserve holds rates steady under new chair Warsh

The United States Federal Reserve will hold interest rates steady at 3.5 to 3.75 percent amid heightened inflationary pressures on the US economy.

The central bank announced the decision, which was unanimous, on Wednesday following its first two-day policy meeting under the leadership of Kevin Warsh, who took over as Fed chair from Jerome Powell last month.

“Economic activity is expanding at a solid pace despite elevated uncertainty that owes, in part, to the conflict in the Middle East,” the Fed said in a news release.

“Inflation remains elevated relative to the Committee’s 2 percent goal, in part reflecting supply shocks that have driven price increases in certain sectors, including energy,” it added.

The decision was in line with expectations. CME FedWatch, which tracks the likelihood of monetary policy decisions, said there was a 99 percent chance that rates would remain unchanged.

Inflation hit 4.2 percent last week, marking a three-year high, according to data from the consumer price index report from the US Department of Labor — a key gauge the central bank uses to track inflation.

That was driven primarily by heightened energy prices, which jumped 23.5 percent in May. However, news of a looming peace deal that could end the war between the US and Iran and reopen the Strait of Hormuz has driven down oil prices in recent days, with prices falling to a three-month low earlier this week.

However, even if the strait opens soon, supply chain bottlenecks, energy production halts, and depleted fuel stockpiles mean it could be months before energy prices for consumers return to prewar levels.