Fed Holds Steady on Interest Rates Amid Inflation Frustration

The Federal Reserve is set to keep its benchmark interest rate unchanged at this week's meeting, despite growing frustration among policymakers over persistent inflation above the 2% target.

Inflation has been stuck above the Fed's goal for more than five years, with the latest figure showing it remains elevated. New Fed Chair Kevin Warsh has expressed 'no tolerance' for high inflation, but the central bank may hold off on a rate hike to avoid disrupting financial markets.

Analysts at BNP Paribas Securities suggest that policymakers will wait until next September to act, despite the growing risk of a rate hike in response to high and persistent inflation. A survey by the CME FedWatch tool shows only 29% of Wall Street traders predict a rate increase this week, but 76% foresee one in September.

The uncertainty over inflation is compounded by ongoing tensions between the US and Iran, which have driven up oil prices. The price of oil briefly surged past $100 a barrel last week, before settling down on hopes for reduced tensions. However, early Wednesday saw Jordan intercept missiles launched from Iran, casting further uncertainty over the Fed's decision-making.