Warsh-era at Fed starts with status quo
The Federal Reserve held interest rates steady on Wednesday at the end of the first meeting chaired by Kevin Warsh, with a new policy statement
The Federal Reserve held interest rates steady on Wednesday at the end of the first meeting chaired by Kevin Warsh, with a new policy statement and economic projections reflecting growing concern about the inflation stoked by the Iran war even as oil prices slide on peace deal hopes. Recent data showed strong US hiring, a low unemployment rate, and inflation well above the US central bank's 2% target.The pause extended the Fed's wait-and-watch approach as officials assess whether inflation pressures are temporary or more persistent.The rate decision was unanimous for the first time in a year, with policymakers removing forward guidance on the direction of the interest rate.
The Central bank moved in favour of one rate hike by the end of 2026.A policy statement showed other signs of Warsh's early influence on the debate as he takes over after being appointed earlier this year by President Donald Trump with an expectation that he would deliver the rate cuts the president has demanded.The description of the economy touched on issues Warsh has emphasized, mentioning that "productivity growth and capital investment are strong." While acknowledging that inflation was "elevated relative to the Committee's 2% goal," that was assigned in part to "supply shocks that have driven price increases in certain sectors, including energy."New projections show inflation slowing sharply next year.
"The Committee will deliver price stability," the statement said.Projections among officials showed the policy interest rate, set in the 3.5%-3.75% range since December last year, would rise by the end of this year.The outlook for inflation was marked up from 2.7% for the end of 2026 to 3.6%, before falling to 2.3% next year, all without a rate increase - consistent with the statement language attributing high prices to supply disruptions that would typically be expected to pass.For Indian investors with US exposure, analysts advised be cautious about reading the headline as a clear signal either way.
"Inflation's still running a bit hot, some people are even floating a hike later in the year so honestly it could go in a few directions. That's why we would lean towards staying diversified and not making big moves off one meeting. US markets are a long-term thing for us. A day like this is more about staying steady than reacting," said Viram Shah, Founder & CEO, Vested Finance.
The BriefWire