{"id":482607,"date":"2026-06-17T22:56:12","date_gmt":"2026-06-17T22:56:12","guid":{"rendered":"https:\/\/www.newsbeep.com\/nz\/482607\/"},"modified":"2026-06-17T22:56:12","modified_gmt":"2026-06-17T22:56:12","slug":"us-federal-reserve-holds-rates-steady-raises-inflation-expectations","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/nz\/482607\/","title":{"rendered":"US Federal Reserve holds rates steady, raises inflation expectations"},"content":{"rendered":"

By Asad Hashim and Myriam Lemetayer, AFP<\/p>\n

The US Federal Reserve has held interest rates steady as expected at Kevin Warsh’s first meeting in charge of the central bank, raising its year-end inflation expectations and projecting a rate hike by the end of 2026.<\/p>\n

The Fed decided to hold rates steady at 3.50 to 3.75 percent for the fourth consecutive meeting, with the vote being unanimous for the first time in a year.<\/p>\n

Policymakers said economic activity was “expanding at a solid pace despite elevated uncertainty that owes, in part, to the conflict in the Middle East”.<\/p>\n

“Inflation remains elevated relative to the Committee’s 2-percent goal, in part reflecting supply shocks that have driven price increases in certain sectors, including energy.”<\/p>\n

The decision came at the first meeting of the Federal Open Market Committee (FOMC) since Warsh took charge at the central bank.<\/p>\n

Republican President Donald Trump has pushed an unprecedented campaign of intimidation<\/a> to pressure the Fed to lower interest rates.<\/p>\n

However, US inflation came in at a three-year high in April, fuelled by Trump’s war on Iran, which saw energy prices skyrocket, with knock-on effects on a range of sectors in the world’s largest economy.<\/p>\n

\"US<\/p>\n

US President Donald Trump<\/p>\n

AFP \/ KENT NISHIMURA<\/p>\n

On Wednesday, Fed leaders also released their Summary of Economic Projections, raising year-end PCE inflation expectations to 3.6 percent from 2.7 percent in March.<\/p>\n

American households have been battered by years of rising prices, with inflation climbing above the Fed’s long-term two-percent target.<\/p>\n

Warsh has backed interest rate cuts in the recent past, despite inflation remaining well above the target – it was 3.8 percent in April, according to the central bank’s preferred gauge.<\/p>\n

As expected by analysts, Warsh appeared to join other policymakers in allowing the energy price shock before making a move.<\/p>\n

“I think he’s going to be in the wait-and-see camp,” said Dan North of Allianz Trade. “It’s pretty hard to justify a cut when you’ve got inflation in the pipeline already.”<\/p>\n

Hike expected by year end<\/p>\n

Before the war, markets had priced in at least one interest rate cut by the end of the year, but that has changed to the expectation of a hike at the Fed’s December meeting.<\/p>\n

On Wednesday, Fed policymakers raised their projected year-end interest rate, signalling that they expected one interest rate hike by the end of 2026.<\/p>\n

The Summary of Economic Projections was based on input from 18 of 19 policymakers, with one withholding their projection, the Fed said.<\/p>\n

Fed chairperson Warsh has said he wants to reduce the amount the central bank communicates about its decisions and was widely expected to withhold his projections.<\/p>\n

That is part of Warsh’s “reform-oriented” agenda. He has called for the Fed to scrap its “dot-plot,” a group-tracking of Fed leaders’ expectations on rates, while keeping private each board member’s individual opinion.<\/p>\n

\"\"<\/p>\n

US Federal reserve headquarters in Washington.<\/p>\n

Wednesday’s statement was shorter than normal, and removed the forward guidance on the direction of the interest rate, which has been a constant in recent years.<\/p>\n

US inflation came in at 3.8 percent in April, according to the Fed’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) prices index.<\/p>\n

‘Not helping his case’ –<\/p>\n

Pao-Lin Tien, an economics professor at George Washington University, told AFP that moving towards more opaque monetary policymaking could mean inflation expectations were less anchored.<\/p>\n

“I think our fear would be that without the forward guidance, inflation expectations might become a little bit more volatile,” she said.<\/p>\n

Trump is likely to be angered by anything short of a rate cut. The 80-year-old Republican wants to see the Fed lower borrowing costs to increase economic activity despite the already high inflation.<\/p>\n

“President Trump is not helping his own case by making these demands so openly, it makes it harder for anyone he appoints to actually do that,” Tien said.<\/p>\n

“He does the opposite of what he needs to do in order to make sure the rates go lower,” she added, referring to the war on Iran.<\/p>\n","protected":false},"excerpt":{"rendered":"By Asad Hashim and Myriam Lemetayer, AFP The US Federal Reserve has held interest rates steady as expected…\n","protected":false},"author":2,"featured_media":482608,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[138,219,111,139,69],"class_list":["post-482607","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-business","tag-economy","tag-new-zealand","tag-newzealand","tag-nz"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/482607","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/comments?post=482607"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/482607\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media\/482608"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media?parent=482607"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/categories?post=482607"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/tags?post=482607"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}