Fed Holds Rates Constant, says Inflation Struggle Not Over
The US Federal Reserve on Wednesday kept its benchmark interest rate unchanged, signaling confidence in the economy’s resilience but stressing that inflation remains too high and more policy moves may be coming.
The Federal Open Market Committee (FOMC) voted 10-2 to keep the target range for the federal funds rate at 3.75% to 4%, saying the action supports the central bank’s twin mandate of maximum employment and price stability.
The decision comes as the economy remains on a sound footing. Economic activity continued to increase at a “strong pace” with domestic spending staying resilient despite elevated uncertainty related in part to geopolitical developments, the Fed said. Officials also cited high capital investment and good productivity gains as evidence of underlying economic health.
The committee said the job market has likewise been solid, Job creation has matched the rise in the labour force, and the unemployment rate has not budged, indicating that firms are still adding workers at a solid clip with no major worsening in labor market conditions.
The result reflected a split among committee members. Governors Lisa D. Cook and Beth M. Hammack dissented, arguing for a quarter-percentage-point increase in the target range at this meeting.
Their disagreement reflects fears among some officials that inflation risks are still large enough to justify tighter monetary policy ,even was the economy shows signs of resilience
The Fed also stated it will maintain its policy of adequate reserves in the banking sector, a critical piece of its larger monetary policy framework.
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