Fed Holds Steady on Interest Rates Amid Inflation Worries
The US Federal Reserve kept benchmark interest rates steady at 3.5% to 3.75%, sparking a market downturn on Wednesday. The decision by the Federal Open Market Committee (FOMC) was met with a significant fall in stock markets, with the Dow Jones plummeting 1,153 points, or 2.19%, and the NASDAQ down 433 points, or 1.74%. The move comes as inflation continues to rise, fueled by President Donald Trump's Iran war and its economic fallout.
Fed Chairman Kevin Warsh called the dissent among FOMC members a 'good family fight' over how to balance inflation taming with economic growth. However, Warsh disappointed Trump, who had expected lower interest rates to combat rising prices. Trump defended Warsh, saying he was doing a 'fantastic job' and deflecting blame to the FOMC.
The next rate-setting meeting will take place in September, just before the November midterm election. The Fed's commitment to bringing inflation down to 2% remains unchanged, with Warsh reiterating that 'I do not believe that price stability and full employment is an either-or proposition.' He emphasized that 'where necessary and appropriate, we will not hesitate to act.'