Federal Reserve expected to keep rates unchanged as Warsh faces questions on inflation

WASHINGTON (TNND) — The Federal Reserve left its benchmark interest rate unchanged on Wednesday, opting to hold borrowing costs steady as inflation remained above its target and energy prices climbed in the wake of the Iran war.

The central bank’s rate-setting committee voted 9-3 after a two-day meeting to keep the federal funds rate at about 3.6%, marking the fifth consecutive meeting without a change.

The unusually divided vote underscored differing views among policymakers over how aggressively the central bank should respond to inflation.

“I asked for a good family fight and I got one,” Federal Reserve Chair Kevin Warsh said at a news conference in reaction to the dissents, which included Beth Hammack, president of the Federal Reserve Bank of Cleveland; Neel Kashkari, president of the Minneapolis Fed; and Lorie Logan, president of the Dallas Fed.

Warsh, presiding over his second meeting of the central bank’s rate-setting committee, has declared that he has “no tolerance” for elevated inflation.

“For some households, businesses, and market professionals, five years of high inflation have left a mistaken impression that’s hard to shake, that the Fed’s implicit inflation target was somehow above 2%,” Warsh, who was appointed by President Donald Trump, said.

“Let me reiterate: there is no soft inflation target. There is no soft implicit target. Not on this committee’s watch. There’s only a target and it’s 2%,” he added.

Higher interest rates are intended to slow spending and cool inflation by making borrowing more expensive for consumers and businesses. The Fed has held rates steady in recent meetings after an aggressive campaign of increases aimed at bringing inflation under control.

“The economy is showing impressive resilience. Even with recent shocks, the trends are positive and reveal solid growth,” Warsh said.”

Job gains have kept pace with the workforce, and the unemployment rate has changed little. Inflation remains elevated relative to the committee’s 2% goal. The committee remains resolute. You’ve heard this before, but we will deliver price stability,” he added.

The Fed’s next policy meeting is scheduled for September, when officials will again review inflation, employment and other economic data before deciding whether additional policy changes are warranted.

The central bank’s interest rate decisions influence borrowing costs across the economy, including mortgages, auto loans, credit cards, and business financing.

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EDITOR’S NOTE: The Associated Press contributed to this report.