Federal Reserve holds rates as Warsh vows to overhaul communication style

Kevin Warsh presided over his first interest rate decision as Federal Reserve chair on Wednesday, keeping US rates between 3.5% and 3.75% — but the real change was in how the central bank said it. The Fed's rate-setting committee was split on whether to raise rates to tame inflation, pushed up by the US-Israel war in Iran, but unanimously voted to hold steady. Warsh, nominated by President Donald Trump after the ousting of Jerome Powell, had promised to say less and do more. His first statement was 132 words, down from almost 350 in April. It ended bluntly: "The Committee will deliver price stability." The statement also removed any hint of future rate cuts. Nine of the 18 central bankers who contributed to the "dot-plot" grid of rate expectations predicted a hike this year, while one expected a cut and eight saw no change. Warsh himself opposed the dot-plot but encouraged colleagues to publish it. Samuel Tombs, chief US economist at Pantheon Macroeconomics, called the dot-plot's tilt toward hikes the "big news." Trump, who had pushed Powell for cuts and expected Warsh to deliver them, said of the decision: "It's alright… whatever." When asked about possible rate hikes, he added: "It could happen… it's hard to believe… it just keeps the country down, it is so unusual." But he praised Warsh: "We have a very good guy over there now, so I'm guided by what he wanted." Inflation ran at 3.8%, above the Fed's target, and uncertainty hung over Trump's deal to end the war with Iran. The Fed's statement noted: "Economic activity is expanding at a solid pace despite elevated uncertainty that owes, in part, to the conflict in the Middle East."