US Fed Keeps Rates Steady Despite Inflation Concerns

The US Federal Reserve kept interest rates steady at 3.50-3.75 per cent on Wednesday, July 29, despite concerns about inflation. The decision was expected by most investors, but there were significant bets on a rate hike in the days leading up to the meeting.

Consumer inflation eased to 3.5 per cent year-on-year last month, but is expected to rise again due to seesawing oil prices from President Donald Trump's war on Iran. The Fed has a dual mandate to keep inflation at its long-term target of two per cent while ensuring maximum employment.

Three policymakers, Lorie Logan, Beth Hammack, and Neel Kashkari, dissented from the majority decision, calling for a quarter-percentage-point rate hike. This rare level of dissent has some economists worried that patience is running thin among Fed officials when it comes to inflation.

'PATIENCE IS RUNNING THIN' was how Gregory Daco, chief economist at EY-Parthenon, put it. Since March, inflation has surged to three-year highs due to the war on Iran, which has sent global energy and fertilizer prices skyrocketing.