Washington, June 18: The Federal Reserve has decided to keep its key interest rates unchanged during its first monetary policy meeting under new Chairman Kevin Warsh. This marks the fourth consecutive time the Fed has opted for stability in rates. However, at least half of the Fed’s policymakers believe that interest rates may remain higher than previously expected by the end of this year.
During the two-day Federal Open Market Committee (FOMC) meeting, the central bank unanimously agreed to maintain interest rates in the range of 3.5% to 3.75%. This decision comes amid concerns about the economic impacts of the ongoing conflict between the U.S., Israel, and Iran.
According to the FOMC’s new economic projections, the federal funds rate could rise to 3.8% by the end of the year, up from an earlier estimate of 3.4% in March. This indicates that the Fed anticipates interest rates will be higher than previously thought by year-end.
The Fed’s “dot plot” chart reveals that 9 out of 19 policymakers believe borrowing costs may exceed current estimates by the end of the year. However, Chairman Warsh did not present his own dot plot forecast.
This meeting occurred shortly after the U.S. Labor Department reported a 4.2% increase in the Consumer Price Index (CPI) in May compared to the previous year. This rise was primarily driven by surging energy prices due to the U.S.-Israel and Iran conflict, marking the largest annual inflation increase since 2023.
Commenting on inflation, Kevin Warsh emphasized that under his leadership, the FOMC is committed to ensuring price stability, with all members in full agreement on this issue. He stated, “We know that inflation has remained significantly above the Fed’s 2% target for a long time. This situation has persisted for the past five years. Persistently high prices are burdening the American people, but that does not mean the future will remain the same.”
The Fed’s latest projections estimate the U.S. GDP growth rate to be 2.2% this year, down from the 2.4% estimate in March. The growth forecast for the following year remains unchanged at 2.3%.
Additionally, the Fed has raised its estimate for the Personal Consumption Expenditures (PCE) inflation rate, now projected to be 3.6% by year-end, up from 2.7% in March. For the following year, the estimate is slightly higher at 2.3%, compared to March’s estimate of 2.2%. The PCE is considered a key measure of spending by American households on goods and services.
Following the Fed’s decision, the gap between interest rates in South Korea and the U.S. remains at a maximum of 1.25%.
Kevin Warsh was sworn in as the new Chairman of the Federal Reserve on May 22, succeeding Jerome Powell, who faced public criticism from U.S. President Donald Trump for not lowering interest rates more aggressively.
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