Fed Keeps Rates Unchanged Amid Frustration Over Inflation

Despite growing frustration over high inflation rates, the Federal Reserve is expected to keep its benchmark interest rate unchanged at this week's meeting. However, policymakers may not be so reluctant to act when they gather again next September.

Inflation has been above the Fed's 2% target for more than five years, and new Fed Chair Kevin Warsh told Congress that he had 'no tolerance' for elevated inflation. Warsh is presiding over his second policy meeting this week.

Fed watchers Joseph Egelhof and Guneet Dhingra at BNP Paribas Securities suggest it's possible the central bank will 'release the kraken' with a 'shock rate hike', but more likely policymakers will hold off, reluctant to disrupt financial markets. They may also want to see more economic data before making a decision.

The Commerce Department is set to release its first look at April-June economic growth and the Fed's preferred inflation measure, the personal consumption expenditures (PCE) price index, for June on Thursday.