Fed Keeps Rates Steady, Leaves Door Open for September Hike

The Federal Reserve has decided to keep its target for the federal funds rate unchanged at 3.5-3.75%. This decision was in line with market expectations and those of most economists, but the Fed left the door open for a potential interest rate hike in September.

ABN AMRO strategists pointed out that the Fed's decision to keep rates on hold reflects its continued focus on inflation control, with Chairman Kevin Warsh emphasizing the importance of maintaining a 2% inflation target. This commitment was evident in the Fed's statement, which noted that 'inflation remains elevated relative to the Committee's 2 percent goal'.

Warsh stressed that the Fed has a hard target for inflation and will take necessary actions to achieve it. The FOMC appears to be taking market signals into account, particularly with recent data indicating that higher rates are doing the tightening job. However, this may also suggest that actual hikes could become less necessary.

While the Fed did not explicitly rule out a September rate hike, ABN AMRO strategists caution that high oil prices could still trigger an increase in interest rates by the end of the month.