Due to the energy crisis and ongoing inflation concerns, the US Federal Reserve is leaving its key interest rate unchanged.
The interest rate range will remain at 3.5 to 3.75% for the fourth time this year, the Federal Reserve (Fed) Board of Governors announced in Washington on Wednesday.
The latest monetary policy decision was the first under new chair Kevin Warsh, who succeeded the Trump-berated but Wall Street-respected Jerome Powell.
Powell remains a member of the Fed's Board of Governors, which sets monetary policy and votes on interest-rate decisions.
Economists had expected the central bank to leave its key interest rate unchanged this time.
Given the uncertain global situation, coupled with rising inflation, interest rate cuts seem unlikely going forward – instead, a tighter monetary policy appears more likely as the year progresses to bring inflation under control.
This is due to the consequences of the war in Iran and the blockades in the Strait of Hormuz, which have significantly restricted the global energy supply. Consequently, companies are currently having to spend much more on oil, gas and fertilizer.
Last Thursday, the European Central Bank raised its benchmark deposit rate from 2% to 2.25%, saying inflationary pressures from the Iran war was behind the rate hike. It was the first increase since September 2023.
Warsh is said to be close to President Donald Trump, who is strongly advocating lower interest rates. Given the current economic situation, many economists are against a looser monetary policy.
US inflation was last at 4.2%, well above the Fed's target of 2%.
The Fed sets interest rates with the dual aim of maintaining price stability and supporting maximum employment. If rates are too high, they can slow economic activity by making borrowing more expensive for businesses and consumers. Lower rates, by contrast, can boost growth and job creation but also risk pushing inflation higher.
