Fed Set to Hold Rates Amid Inflation Concerns, War on Iran

The US Federal Reserve is set to make its decision on interest rates at its second meeting under new chairman Kevin Warsh, which starts on Tuesday. Markets are expecting policymakers to keep interest rates steady amid inflation concerns that could be exacerbated by the renewed war on Iran.

Warsh was chosen to lead the Fed by President Donald Trump, who has made his demand for lower interest rates clear. The Fed's open market committee (FOMC) will announce its decision on Wednesday at 2:00 pm (1800 GMT), followed by a press conference by Warsh.

Most investors expect the Fed to hold rates steady at 3.50-3.75 per cent for the fifth straight meeting, according to CME's FedWatch monitoring tool. US consumer inflation eased to 3.5 per cent year-on-year last month, but remains far higher than the Fed's long-term 2 per cent target.

Fed Governor Chris Waller said that policymakers have been losing patience with persistent inflation and may need to tighten monetary policy to prevent a repeat of the 2021-to-2022 inflation episode. Some analysts argue that opacity in decision-making creates more uncertainty for markets.