US Federal Reserve Holds Interest Rate Steady Amid Ongoing Global Tensions

The US Federal Reserve held its interest rate steady between 3.5 and 3.75 per cent on Wednesday, following the second meeting of the Federal Open Markets Committee (FOMC) with Kevin Warsh as Fed Chairman.

Economic activity is expanding at a solid pace, despite elevated uncertainty caused by the conflict in the Middle East, according to the press release announcing the decision. Productivity growth and capital investment are strong, job gains have kept pace with the workforce, and the unemployment rate has remained relatively unchanged.

The Fed's preferred inflation gauge, Personal Consumption Expenditures (PCE), reached a three-year high of 4.1 per cent in May, exceeding the committee's target of two per cent. However, June PCE data showed a slight softening, potentially giving the Fed additional leeway in its decision.

The decision was not unanimous, with Governors Hammack, Kashkari, and Logan voting in favor of a 25 basis point hike. The FOMC's decision to keep rates steady was largely expected by bond markets and economists, given the persistently high inflation tied to rising oil prices due to ongoing tensions between the US and Iran.