Fed holds rates steady under new Chair Warsh; signals possible hikes later this year

Traders are now fully anticipating a quarter-point interest rate hike from the Federal Reserve by September, a shift driven by renewed inflation worries fueled by a surge in oil prices. New Fed Chair Kevin Warsh's firm stance against high inflation has bolstered these expectations. This development occurred amidst quiet trading, with US markets closed for a holiday.

As widely expected, policymakers at the the US Federal Reserve have kept interest rates unchanged. But in a clear change of tone from previous meetings, Fed officials said they expected raising interest rates later this year rather than lowering them, to tame rising inflation. The meeting was the first chaired by the central bank's new chief, Kevin Warsh, who scrapped guidance about future rate moves and announced new task forces that could reshape how the Fed communicates and analyses data.

WASHINGTON — The U.S. Federal Reserve on Wednesday held its benchmark interest rate steady in its first rate decision since new Chair Kevin Warsh took office last month, with at least half of its policymakers anticipating a higher rate later this year. During the two-day Federal Open Market Committee (FOMC) meeting, the central bank decided unanimously to leave the rate unchanged at the 3.5-3.75 percent range, marking its fourth consecutive pause, amid lingering concerns over the economic fallout of the U.S.-Israeli war against Iran. According to the FOMC members' new median economic projection, the federal funds rate is expected to be cut to 3.8 percent at the end of this year, up from the March projection of 3.4 percent, suggesting a higher year-end rate than previously projected. The "dot plot" projection chart showed that nine of the 19 FOMC participants expected borrowing costs to be higher by year-end. Warsh did not submit a dot plot projection. The meeting came a week after the U.S. Labor Department reported that the consumer price index rose 4.2 percent in May from a year earli

Nine of 19 officials who participate in Fed policy meetings penciled in at least one interest rate increase by year end, up from zero in March. It was Kevin Warsh’s first as Fed chair.

The dollar strengthened as the Federal Reserve held interest rates steady but signaled a potential hike later this year, with policymakers raising inflation projections. New Fed Chairman Kevin Warsh's revised statement removed forward guidance, impacting market expectations. Meanwhile, other central banks like the BOE and BOJ are also navigating inflation concerns.

The Federal Reserve left interest rates unchanged at its first policy meeting under chair Kevin Warsh, but nearly half of policymakers signalled they could support a rate hike later this year as inflation remains elevated.