Kevin Warsh held US interest rates at 3.5% to 3.75% on Wednesday in his first meeting in charge of the Federal Reserve. The unanimous vote kept borrowing costs unchanged even as inflation was running at 3.8% and above the Fed's target.
For households, companies and traders, the decision leaves financing costs where they were while the committee signaled that higher rates could still come later this year.
Warsh Keeps The Range
3.5% to 3.75% is the range the Fed left intact after the rate-setting committee decided to stay steady, even though governors were split on whether to hold or raise. Warsh announced the decision and urged colleagues to proceed with the dot-plot, the quarterly forecast that maps where policymakers expect rates to go.
132 words is how long Wednesday's statement ran, far shorter than the almost 350 words in April. The shorter text also dropped language that had hinted the Fed was leaning toward lower interest rates later, tightening the message at the same time it held policy steady.
Nine Of 18 See A Hike
Nine of 18 central bankers projected at least one rate hike this year, one of 18 saw a cut, and eight of 18 expected no change. That split left the Fed with a steadier policy rate today but a more hawkish path in the forecast, which is the part banks, borrowers and investors will use to price credit and expectations over the rest of the year.
3.8% inflation was running above the Fed's target when the committee said economic activity was expanding at a solid pace despite elevated uncertainty. The statement said productivity growth and capital investment are strong, and that job gains have kept pace with the workforce while unemployment has changed little.
Trump Calls It Alright
Donald Trump, asked about the decision, said, "It's alright… whatever." He also said, "It could happen… it's hard to believe" when asked about potential interest rate hikes, and added, "We have a very good guy over there now, so I'm guided by what he wanted" in reference to Warsh.
Kevin Warsh did not give his own projection for the dot-plot, so the clearest guide for the next leg of policy comes from the 18 central bankers who did. If the nine who see a hike keep that view, rates can stay anchored for now but move higher before year-end, leaving markets to trade around the Fed's own split rather than a single chair's signal.
