Fed Keeps Rates Unchanged Amid Frustration Over High Inflation

The Federal Reserve is expected to keep interest rates unchanged at its meeting this week, despite growing frustration over high inflation. The Fed's benchmark rate has been above the 2% target for over five years, and new Fed Chair Kevin Warsh has expressed 'no tolerance' for elevated inflation.

Fed watchers Joseph Egelhof and Guneet Dhingra at BNP Paribas Securities have predicted a possible 'shock rate hike' this week, but more likely policymakers will hold off to avoid disrupting financial markets. Only 29% of Wall Street traders predict a rate increase this week, while 76% foresee a hike in September.

The uncertainty surrounding the Iran war and its impact on oil prices has added complexity to the Fed's decision-making process. Inflation has been above the 2% target since early 2021, with core inflation cooling slightly in June due to decreased apartment rents and lower gasoline prices.