Federal Reserve Holds Interest Rates Steady
Today, and chairing his first FOMC (Federal Open Market Committee) meeting, the new Chairman of the Federal Reserve Kevin Warsh and all his colleagues on the FOMC voted unanimously to keep interest rates steady in the range of 3.50% – 3.75%. Rates remained unchanged despite the fact that headline inflation is currently 3.80% with core inflation sitting at 3.30% (excludes volatile energy and food costs) which is well above the Fed’s long-term target figure of 2.00%. The policymakers SEP (Summary of Economic Projections) raised their forecast for interest rates advising that there may be one rate hike between now and the end of the year.
Officials further advised that inflation remained in an elevated state partly due to supply shocks due to the United States/Iran Israel conflict which has caused energy prices to skyrocket. The Federal Reserve has a dual-purpose mandate where they have to keep inflation at the target figure of 2.00% whilst ensuring maximum employment. Signals emanating from inside the Federal Reserve suggest that policymakers now consider the employment market to be in a healthy state and are now going to concentrate on tackling inflation.
In his first post-meeting press conference as Chairman of the Federal Reserve, Kevin Warsh announced plans to overhaul the central bank with a particular eye on its public communications. He went on to advise he will create five new taskforces that will look into productivity and jobs, the Federal Reserve’s balance sheet, data, and broad conduct of monetary policy including communications. Language in the committee’s statement has already changed with Chairman Warsh acknowledging “It’s a bit shorter, a bit simpler and it dispenses with some older language. That statement just gives you the facts, as best we can judge it”.
The statement also noted that “Economic activity is expanding at a solid pace despite elevated uncertainty that owes, in part, to the conflict in the Middle East. Productivity growth and capital investment are strong, job gains have kept pace with the workforce, and the unemployment rate has changed little. Inflation remains elevated relative to the Committee’s 2.00% goal, in part reflecting supply shocks that have driven price increases in certain sectors, including energy”. Chairman Warsh told reporters that the Federal reserve is committed to reducing inflation to 2.00%.
Since President Trump took office for the second time there have been unprecedented attacks from the White House on the character and policy decisions of Chairman Warsh’s predecessor Jerome Powell. Under his watch the FOMC last cut interest rates on 10th December 2025, and he regularly incurred the President’s wrath as he was insisting the Federal Reserve cut rates on a regular basis. Interestingly, with a new hawkish stance in the Federal Reserve, Trump has withheld judgement on the new leader of the Federal Reserve (also Trump’s pick for the job), and has said “he will be guided by what he (Warsh) wants. An interesting about turn for a leader who is dead set on interest rate cuts. However, if rates do not come down sometime soon, we may see President Trump reversing to type with the new Federal Reserve leader coming in for a bit of White House wrath.
