Fed keeps interest rates unchanged in Warsh's 1st meeting as Chair

The US Federal Reserve on Wednesday kept its benchmark interest rate unchanged, as policymakers balanced persistent inflation pressures against a resilient economy in the first policy meeting chaired by Kevin Warsh.The Federal Open Market Committee (FOMC) left the federal funds rate unchanged at 3.5%-3.75%, extending a pause that has been in place since late 2025. The decision was widely expected by financial markets.
In its policy statement, the Fed said the US economy continues to grow at a solid pace despite elevated uncertainty, partly due to the ongoing conflict in the Middle East. "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. Job gains have kept pace with the workforce, and the unemployment rate has changed little," the central bank said.The Fed's decision comes as inflation remains above its long-term target of 2%, although price pressures have eased somewhat in recent months. At the same time, economic growth and labour market conditions have remained relatively strong, reducing the urgency for immediate rate cuts.
The meeting marked the first major policy decision under Kevin Warsh, who took over as Fed Chair last month after succeeding Jerome Powell. As a result, investors were paying close attention not only to the rate decision but also to Warsh's comments on the future direction of monetary policy.
The central bank's cautious stance reflects concerns that inflation could remain elevated even as growth slows. Earlier this year, disruptions in the Strait of Hormuz pushed up energy prices and raised fears of renewed inflationary pressure. However, easing oil prices following a recent agreement involving Iran have helped reduce some of those concerns.Analysts said markets are looking for signals on whether the Fed could begin lowering interest rates later this year if inflation continues to cool."We expect the press conference to be pivotal. This will be Kevin Warsh's first public appearance as Chair. We do not really know what his policy views are," Jonathan Pingle, economist at UBS, said in a note ahead of the decision.Warsh assumes leadership of the central bank at a time of increased political attention on monetary policy. President Donald Trump has repeatedly called for lower borrowing costs to support economic growth. However, a still-strong labour market and inflation that remains above target have limited the Fed's room to begin cutting rates immediately.