Washington — The U.S. Federal Reserve kept its benchmark interest rate unchanged in its first policy decision under new Chair Kevin Warsh, with at least half of policymakers projecting higher rates later this year.
The decision came after the central bank’s two-day Federal Open Market Committee meeting. Policymakers voted unanimously to leave the federal funds rate in the 3.5 percent to 3.75 percent range, marking the Fed’s fourth consecutive pause.
The decision comes amid continued concerns over the economic impact of the U.S.-Israeli war against Iran, according to Yonhap news agency.
According to the FOMC’s latest median economic projections, the federal funds rate is expected to stand at 3.8 percent at the end of this year, up from the March projection of 3.4 percent. The shift suggests officials now expect rates to remain higher than previously anticipated.
The Fed’s latest “dot plot” showed that nine of the 19 FOMC participants expect borrowing costs to be higher by year-end. Warsh did not submit a dot plot projection.
The meeting was held a week after the U.S. Labor Department reported that the consumer price index rose 4.2 percent in May from a year earlier. The increase was largely driven by higher energy prices caused by the U.S.-Israeli war against Iran and marked the largest annual rise since 2023.
Addressing inflation, Warsh said the Fed under his leadership will remain focused on restoring price stability.
“We recognise that inflation has been running well ahead of the Fed’s long-stated inflation goal of 2 percent. That’s been going on for more than five years,” he said. “Persistently high prices are a burden for the American people, but the recent past need not be prologue.”
Warsh said FOMC members are “unambiguous and unanimous” in their commitment to price stability.
The Fed now expects U.S. gross domestic product to grow 2.2 percent this year, down from the 2.4 percent projected in March. Growth for next year is projected at 2.3 percent, unchanged from the previous forecast.
Personal Consumption Expenditures inflation is projected to reach 3.6 percent by the end of this year, up from the March projection of 2.7 percent. PCE inflation is expected to ease to 2.3 percent by the end of next year, slightly above the 2.2 percent projected in March.
PCE is a measure of household consumer spending on goods and services in the United States.
The latest Fed decision leaves the gap between the key interest rates of South Korea and the United States at up to 1.25 percentage points.
Warsh was sworn in as Fed chair on May 22, succeeding Jerome Powell, who had repeatedly been criticized by U.S. President Donald Trump for not lowering interest rates. (Source: IANS)
