The US Federal Reserve kept its benchmark interest rate unchanged at a target range of 3.75 per cent to 4.00 per cent, keeping the average effective rate at approximately 3.9 per cent despite stubbornly high inflation.
In a statement released after its two-day policy meeting, the Fed said, inflation remains elevated and holding off on an increase will allow the accumulation of more information that will help determine what policy the Fed should pursue to ensure a timely return of inflation to the central bank’s 2 per cent target.
The statement leaves the Fed’s next moves unclear, even though officials last month pencilled in another rate hike for this year. The Fed’s decision comes just six days before a midterm election that has focused heavily on concerns around the cost of living and affordability. Two Fed officials dissented from yesterday’s decision, with Fed governor Lisa Cook and Federal Reserve Bank of Cleveland President Beth Hammack voting in favour of hiking rates by a quarter point.
Consumers have generally soured on an economy weighed down by more expensive gas, groceries, and clothing, among other items. Yet Warsh faces plenty of challenges in getting inflation back to target.
Other parts of the economy are already being hit by higher rates, which were lifted by market forces, even before the Fed hiked last month. Inflation picked up in September, when consumer prices rose 3.7 per cent compared with a year earlier. The increase was much bigger than the 2.4 per cent rate in February, just before the Iran war.
The Fed, led by Chairman Kevin Warsh, raised its benchmark rate last month for the first time in three years, defying President Donald Trump’s demands for rate cuts.
President Trump has also slammed the Fed for raising its key rate last month, though he largely blamed the central bank’s rate-setting committee, rather than Warsh, whom he appointed.
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