The US Federal Reserve has decided to hold interest rates steady, pointing to persistent inflation and solid economic growth. The latest policy statement provided little indication of when borrowing costs might be reduced. After a two-day meeting, policymakers voted 10 to 2 to maintain the benchmark interest rate in the 3.50 per cent – 3.75 per cent range.
The Fed’s statement noted that “economic activity has been expanding at a solid pace”. However, it offered no specific timeline for future rate reductions, stating that “the extent and timing of additional adjustments” to the policy rate would depend on forthcoming economic data and the overall economic outlook.
Notably, two governors dissented from the majority decision. Governor Christopher Waller, a potential candidate to succeed Fed chairman Jerome Powell, and Governor Stephen Miran both favoured a 0.25 percentage-point rate cut. The central bank acknowledged that inflation “remains somewhat elevated,” while the job market has “shown some signs of stabilisation”.
While the Fed observed that “job gains have remained low,” it removed previous language suggesting increased downside risks to employment. This shift indicates that policymakers are collectively less concerned about a rapid deterioration in the labour market, despite inflation still being a concern.
