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The Federal Reserve on Wednesday left its benchmark federal funds rate unchanged, despite stubbornly high inflation and recent signaling that rate hikes are back on the table.
In a 9-3 vote, Fed officials kept the central bank’s key interest rate in a range of 3.5% to 3.75%, where it has been since December. The three dissenting Fed officials voted to raise rates.
The Fed’s funds rate determines what banks charge each other for short-term loans. But it ripples widely across the economy, impacting everything from mortgages and credit card debt to business loans.
Fed Chairman Kevin Warsh told reporters after the decision’s release that he asked for “a good family fight, and I got one.”
Raising interest rates could help bring down the U.S. annual inflation rate, currently at 3.5%. Warsh acknowledged that inflation has surpassed the Fed’s target rate of 2% for five years and said the central bank is committed to price stability.
Yet he asked for patience, saying there is no “magic wand” to fix inflation. He said the Fed is in a period of “watchful thinking, not watchful waiting.”
Many economists expected Wednesday’s decision to keep rates unchanged, but predict that the Fed will raise rates at its next meeting in September. At last month’s meeting, roughly half the officials thought a rate increase would be warranted sometime this year.
‘Very political’
President Donald Trump has publicly pressured the Fed to lower rates, despite persistent inflation, and repeatedly threatened the job of former Chairman Jerome Powell when rates remained relatively high. On Monday, Trump again called for lower rates, but seemed to support his own nominee for chairman.
“Kevin [Warsh] is fantastic,” Trump told reporters aboard Air Force One. “But he’s got a board, and the board members are very political.”
Warsh has pledged to remain independent of the president and on Wednesday struck an optimistic and conciliatory tone.
He said the officials engaged in “robust discussions” and asked all the right questions.
“We have the right team to win the battle to fight inflation,” he said, trying to assure Americans increasingly squeezed by rising prices.
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