Fed Holds Interest Rates Steady in Warsh’s First Meeting​

The Federal Reserve held interest rates steady on Wednesday for the fourth consecutive policy meeting. Central bank officials signaled that they’re looking to hold rates steady through this year — but are close to hiking rates once.

Fed members voted in a unanimous decision — the first since last June — to hold the benchmark interest rate in the range of 3.5% to 3.75%.

By a close margin, Fed officials see holding rates or possibly hiking once this year before cutting once next year. The hawkish shift comes after policymakers previously projected one 2026 rate cut, but the job market has firmed and inflation has risen to the highest level in three years, pushed up by higher energy prices from the conflict in the Middle East.

The meeting was the first under new Fed Chairman Kevin Warsh, who announced significant changes in some Fed operations, with possibly much more to come. The big change on Wednesday: The FOMC did not issue “forward guidance,” public communication that telegraphs the likely direction of monetary policy and interest rates.

Warsh also announced task forces to examine five areas that touch monetary policy: Fed communications (including forward guidance), the Fed’s balance sheet, use of existing data sources, productivity and jobs, and the Fed’s inflation framework.

When he was sworn in, Warsh said he intended to lead a “reform-oriented Fed,” and that work has clearly begun.

Only 18 officials on the Fed’s 19-member Federal Open Market Committee submitted interest rate projections, the so-called dot plot. Warsh said he encouraged his colleagues to make projections but declined to submit one of his own, “consistent with my long-held views,” he said.

This year, eight officials see holding rates steady, three officials see one rate hike, five see two rate hikes, and one sees four hikes. Only one member projects a single rate cut.

The Fed dramatically shortened its policy statement and dropped language signaling that its next move would be a rate cut.

The language previously stated that “in considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks.”

In the new statement, officials noted that the economy is expanding at a “solid” pace despite elevated uncertainty, in part due to the conflict in the Middle East. They said that inflation remains elevated, in part reflecting supply shocks that have driven up price increases in certain sectors, including energy.