US Fed holds rates, three members dissent on ease bias
The Federal Reserve kept interest rates steady but, in its most divided decision since 1992, noted growing concerns about inflation in a policy statement; This drew three separate opinions from officials who no longer think the U.S. central bank should report a bias toward lowering borrowing costs.
The fourth opposition at the meeting came in the direction of a quarter point interest rate cut.
“Inflation has risen, reflecting in part the recent rise in global energy prices,” the Fed said in its policy statement, different from its previous statement that inflation had risen only “slightly.”
Developments in the Middle East contribute to the high level of uncertainty regarding the economic outlook.
The 8-4 vote was the most divisive since Oct. 6, 1992, and shows the breadth of views incoming Fed chief Kevin Warsh will face on the rate cuts he has said he expects from Jerome Powell, President Donald Trump’s chosen successor, whose term as central bank chief ends May 15.
Although the latest policy statement retained language about how the Fed would consider the “scope and timing of additional adjustments” to interest rates (phrase that hinted at future rate cuts as a possible next move), three policymakers took issue with it.
While Cleveland Fed President Beth Hammack, Minneapolis Fed President Neel Kashkari and Dallas Fed President Lorie Logan supported keeping the policy rate steady in the current 3.50-3.75 percent range, they “did not support including easing bias in the statements at this time” and voted against the new statement.
With global oil prices hovering above $100 per barrel due to the US-backed war against Iran, the Fed struggled to decide whether the effects would be seen more through stagnant growth or higher inflation and kept its policy rate in the range it has been since December, despite Trump’s insistence on looser monetary policy.
The Fed said that despite high inflation, “the unemployment rate has changed little in recent months” and that the economy continues to grow at a “robust pace.”
The new statement will likely be the last statement made under Powell’s leadership.
Earlier Wednesday, the Republican-controlled Senate Banking Committee voted to advance Warsh’s nomination by a 13-11 party line.
The Senate is expected to confirm Warsh next month.
Powell is scheduled to hold a news conference later Wednesday to detail the outcome of the meeting and the economic outlook, and he may also address whether he plans to remain a Fed governor for a separate term that runs through January 2028.
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