Fed Holds Key Interest Rate Decision Amid Iran War-Fuelled Inflation Concerns

The US Federal Reserve's key rate-setting committee has begun its two-day meeting to discuss interest rates, with policymakers expected to hold rates steady amid growing concerns over Iran war-fuelled inflation.

US households have been battered by years of high prices since the Covid pandemic, with consumer inflation easing to 3.5 percent year-on-year last month but expected to rise again on the back of seesawing oil prices from Trump's war on Iran.

Fed Chair Kevin Warsh has repeatedly said the Fed is committed to delivering price stability, and several policymakers have spoken vocally about the need to address surging inflation. The Fed's main tool for achieving its policy goals is setting the economy's key interest rate, which can either cool economic activity and inflation or spur activity and employment but cause prices to rise.

Markets have been pricing in a possibility of a rate hike, with investors giving a more than 30 percent probability that it could come as soon as Wednesday, according to CME's FedWatch tool. However, Trump has put immense pressure on the Fed to cut rates, and Warsh insists he is not Trump's 'puppet'.