US Fed holds rates steady at Warsh’s first meeting, drops bias towards cuts
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The news: The US Federal Reserve held interest rates steady within a 3.5 to 3.75% range at Kevin Warsh’s first meeting as chair. The new chair used the occasion to steer the central bank in a decisively hawkish direction as policymakers contend with inflation fuelled by the Iran war.
Warsh said the Federal Open Market Committee had “a good family fight” over the rate decision for a couple of days before reaching a unanimous hold.
What they said: “I am pleased to report that members of the FOMC are unambiguous and unanimous. This committee will deliver price stability,” Warsh said.
The committee removed a line from its statement that had signalled further rate cuts were likely, which analysts characterised as abandoning its easing bias.
Nine of the 18 officials who submitted projections now expect to raise rates this year, a view none held three months ago, the Fed’s summary of economic projections showed. Warsh, a longstanding critic of forward guidance, declined to submit his own in an early sign of the “regime change” he campaigned on.
The median official now sees no rate cuts next year, with the median rate forecast for the end of 2026 drifting up to 3.75% from 3.4% in March.
Traders responded by fully pricing in a quarter-point rate hike by year-end, according to Bloomberg.
The numbers: US stocks and Treasuries fell following the decision.
The source: US Federal Reserve
