Federal Reserve Maintains Current Rate Levels

The Federal Reserve on Wednesday maintained the current level of interest rates between 3.5 and 3.75 percent amidst “elevated uncertainty” from the “conflict in the Middle East.” 

The meeting and subsequent press conference marked the first of Kevin Warsh’s tenure as chairman of the Federal Reserve. Warsh resisted issuing “forward guidance”––the direction of future actions by the Federal Reserve’s Open Market Committee (FOMC).

“We recognize that inflation has been running well ahead of the Fed’s long-stated inflation goal of 2 percent that’s been going on for more than 5 years,” Warsh reiterated, adding, “This Committee will deliver price stability.”

He announced five taskforces made of policymakers, business leaders, and academics that would investigate key areas of the Fed’s operations: communications, the balance sheet, use of data, productivity, and the Fed’s inflation framework.

The Fed’s Summary of Economic Projections (SEP), which includes its expectations of future rates and inflation, anticipates PCE inflation of 3.6 percent for the end of year, an increase from March’s estimate of 2.7 percent. Core PCE, which excludes volatile items like energy and food, is projected to end the year at 3.3 percent. The SEP does not project inflation reaching the Fed’s 2 percent target until 2028. 

Inflation has remained elevated above the Fed’s target since May 2021, early in the Biden Administration. The most recent consumer price index numbers came in at a 4.2 percent increase and a still-elevated 2.9 percent increase excluding food and energy.

The SEP left open a door for future rate hikes by the end of the year, with nine members expecting rates higher than their current level by the end of the year. This is up from March where zero members of the FOMC anticipated rates higher than 3.75 percent before the end of the year.