Kevin Warsh’s first meeting as Federal Reserve chair ended with interest rates held steady — but a majority of central bankers now expect a hike before the year is out.
The Fed kept its benchmark rate between 3.5% and 3.75% despite a split among governors over whether to raise them to tame inflation, which sits at 3.8%, above target. The decision comes amid the US-Israel war in Iran, which has pushed up prices, and uncertainty over President Donald Trump’s deal to end the conflict.
“Fed holds rates at 3.5%-3.75% in Warsh's first meeting as chair, with dot-plot signalling possible hikes ahead.”
Trump had pushed Warsh’s predecessor, Jerome Powell, to cut rates and made clear he expected Warsh to deliver. Instead, the rate-setting Federal Open Market Committee voted unanimously to hold.
Warsh, a sharp critic of the Fed’s past communication style, delivered a markedly shorter statement — 132 words, down from almost 350 in April. It concluded bluntly: “The Committee will deliver price stability.” It also removed a hint that the Fed was leaning toward future cuts.
The Fed’s “dot-plot” grid of expectations showed that nine of the 18 participants in the rate-setting process predicted a hike this year, one expected a cut, and eight saw no change. Warsh did not offer his own projection — he opposes the dot-plot — but encouraged his colleagues to go ahead.
Samuel Tombs, chief US economist at Pantheon Macroeconomics, called the dot-plot’s signal of potential hikes the “big news” from Wednesday.
Asked about the decision, Trump said: “It’s alright… whatever.” On the possibility of rate hikes, he said: “It could happen… it’s hard to believe,” adding “it just keeps the country down, it is so unusual.” But he praised Warsh, whom he nominated to replace Powell. “We have a very good guy over there now, so I’m guided by what he wanted,” Trump said.