Fed Holds Rates After Its Most Unpredictable Meeting Of The Year

The Federal Reserve left interest rates unchanged Wednesday following one of the most closely watched and unpredictable meetings for the central bank this year.

The Federal Open Market Committee voted 9 to 3 to keep its benchmark federal funds rate in a target range of 3.5% to 3.75%. The Federal Reserve is balancing last month’s cooler-than-expected inflation report, which included the largest month-over-month decline in consumer prices since 2020. Overall, sticky inflation has been above the bank’s target of 2% since 2021.

The decline was driven by falling energy prices as tensions with Iran eased, but oil prices have remained volatile amid shifting ceasefire negotiations, leaving policymakers uncertain about whether inflation will continue to cool or reaccelerate.

Adding to the uncertainty is that newly instated Federal Reserve Chairman Kevin Warsh has made public comments that have underscored the Fed’s commitment to defeating inflation but have stopped short of signaling whether officials are more inclined to hold rates steady, cut them, or raise them further.

Warsh told Congress earlier this month that “The members of our committee have no tolerance for persistently elevated inflation. And we share a resolute commitment to ensure price stability.” He added that sticky inflation is robbing the American people. “It has been a tax on the American people and businesses. We plan on getting rid of that tax,” he said. “That means we need a regime change in policy, and we need new consideration of practices, some of which have been working, some of which haven’t.”

Warsh’s comments have been hawkish, with many analysts originally predicting the Central Bank would raise rates at Wednesday’s meeting. President Trump, however, believes Warsh wants to lower rates. Aboard Air Force One, the president said Warsh wants to do the “right thing,” but his board of governors is inhibiting him. 

“They have a board and Kevin’s fantastic, but he’s got a board and the board members are very political, I would say,” Trump said when asked about rate changes at the Federal Reserve on Monday. “I know what he wants to do, but you need the consent of some people that have perhaps bad intentions. Rates should be lowered. This country could be at 8%, 9%, 10%, 12% GDP. That’s what it should be.”

Kalshi, one of the country’s top prediction markets, shows chances of a rate cut by the end of 2026 at just 4%. Chances of a rate hike have skyrocketed to 70%.