Fed Holds Rates Steady as Hawkish Voices Over Inflation Grow Louder

[Financial News, New York = Reporter Lee Byung-chul]The Federal Reserve held its benchmark interest rate steady once again. This time, however, voices inside the Fed calling for a rate hike grew stronger. Three regional Fed presidents dissented, saying the benchmark rate should be raised by 0.25 percentage point. It was the first time since 2016 that three policymakers cast dissenting votes in the same direction.
On the 29th, local time, the Federal Open Market Committee (FOMC) met and decided to keep the benchmark rate at 3.50% to 3.75%.
Those who argued for a hike were Beth Hammack, president of the Federal Reserve Bank of Cleveland; Neel Kashkari, president of the Federal Reserve Bank of Minneapolis; and Lorie K. Logan, president of the Federal Reserve Bank of Dallas. In a statement released after the meeting, the Fed said they had favored raising the benchmark rate by 0.25 percentage point at this meeting. They have consistently argued that additional tightening is needed, given inflation that has remained above the Fed's 2% target for more than five years.
This vote is also seen as the first test for Fed Chair Kevin Warsh. Since taking office, Warsh has stressed that the Fed should explain the economic conditions under which it would change policy, rather than preannouncing the future path of rates. However, the statement released that day did not include any new reference to the future rate path or the conditions for a policy shift.
Markets had largely expected rates to remain unchanged at this meeting. The statement was almost identical to the one released after the June FOMC meeting. The Fed said, "Despite high uncertainty caused by the conflict in the Middle East, the U.S. economy continues to post solid growth." It also said the labor market remained stable, noting that job gains were keeping pace with a shrinking labor force and that the unemployment rate had shown little change.
As in the previous meeting, the statement ended with the line, "The Committee will achieve price stability."
Views inside the Fed also remain divided over the direction of policy ahead. John Williams, president of the Federal Reserve Bank of New York, said current monetary policy alone could bring inflation back to target. By contrast, Logan said "a modest additional rate hike is needed," while Hammack has also emphasized the need for tighter policy, saying persistent price increases are weighing on households.
Meanwhile, President Donald Trump publicly backed Warsh earlier this week, calling him "fantastic." He also criticized some Fed officials, saying they may be politically motivated.




[email protected] Reporter Lee Byung-chul Reporter