The Federal Reserve kept US interest rates between 3.5% and 3.75% after Kevin Warsh’s first meeting in charge of the central bank – a decision that defied President Donald Trump’s calls for cuts but was unanimously backed by the rate-setting committee.
Inflation, driven up by the US-Israel war in Iran, stood at an above-target 3.8%, and uncertainty over Trump’s deal to end the conflict left the Fed’s 12-member policymaking body with little room to move. The Federal Open Market Committee (FOMC) said in a statement: "Economic activity is expanding at a solid pace despite elevated uncertainty that owes, in part, to the conflict in the Middle East. Productivity growth and capital investment are strong."
“Kevin Warsh held US interest rates steady in his first Fed meeting despite Trump pressure for cuts.”
Warsh, whom Trump nominated to replace Jerome Powell after repeatedly pressuring his predecessor to cut rates, had made clear he was expected to deliver lower borrowing costs. But the new chair took a different course – and earned praise from the president. "We have a very good guy over there now, so I’m guided by what he wanted," Trump said after the decision, adding of the rate hold: "It’s alright… whatever."
The statement itself marked a sharp shift in the Fed’s communication style, a signature promise of Warsh’s tenure. A vocal critic of past Fed verbosity, he had argued the central bank should say less while getting on with its job. The previous statement, from April, ran almost 350 words; Wednesday’s was just 132. "The Committee will deliver price stability," it concluded.
The Fed also dropped language hinting at future rate cuts. Instead, the closely watched “dot-plot” of individual policymakers’ projections showed a clear hawkish tilt: nine of the 18 central bankers who participated in the rate-setting process predicted an interest rate hike this year, while only one expected a cut. The remaining eight forecast no change. Warsh – who opposes the dot-plot format – did not offer his own projection but said he encouraged colleagues to proceed with it.
Samuel Tombs, chief US economist at Pantheon Macroeconomics, said the big news was that the dot-plot now points to potential rate hikes before the year is out. When asked about the prospect, Trump demurred: "It could happen… it’s hard to believe," he said, adding: "It just keeps the country down, it is so unusual."
With inflation still above the 2% target and nine Fed officials bracing for tighter policy, Warsh’s next moves will be closely watched – not least by a president who expects cuts but now says he is guided by his nominee.