Fed holds rates steady at Warsh's first meeting as chair
The Federal Reserve held its benchmark interest rate at 3.5–3.75% on June 17 in a unanimous vote, the first policy decision under new chair Kevin Warsh, who took over from Jerome Powell last month. The central bank pointed to inflation running at a three-year high of 4.2% — well above its 2% target — largely the result of higher energy prices tied to the US-Iran conflict.
That puts the Fed in an awkward position: the inflation it is reacting to comes from a supply shock rather than overheating demand, so a rate increase would do little to address the cause while still weighing on growth. The committee’s projection of a quarter-point increase by year-end signals it is prepared to tighten if energy-driven prices feed into broader inflation, but markets are not pricing a move before September. A durable easing of oil prices following the Iran ceasefire framework could remove much of the pressure on its own.
Warsh also used the meeting to set out a procedural shift, saying the Fed will drop formal forward guidance on the rate path and stand up several internal task forces on productivity, jobs and inflation — an early signal of a less choreographed communication style than under his predecessor.