Fed Leaves Interest Rates Unchanged

The Federal Reserve held its benchmark interest rate at 3.5 to 3.75 percent on Wednesday and, in Kevin Warsh’s first meeting as chairman, released a policy statement less than half the length of its predecessor, scrapping the forward-guidance language that had anchored Fed communication for more than a decade.

“It is shorter and simpler,” Warsh explained.

The decision was unanimous, 12 to 0. Powell’s final statement on April 29 drew four dissents: Miran wanted a quarter-point cut, while Hammack, Kashkari, and Logan backed the hold but objected to the easing bias the statement carried. Warsh’s statement carries no easing bias—no directional guidance of any kind—and the objections vanished with it.

The new statement runs three short paragraphs. It opens with the rate decision and a pledge to maintain ample reserves, then describes the economy, then addresses inflation. The April statement had buried the rate decision beneath two paragraphs of economic assessment.

Here is the statement in full:

The Committee decided to maintain the target range for the federal funds rate at 3-1/2 to 3-3/4 percent, in support of the Federal Reserve’s dual mandate. The Committee reaffirmed its policy of maintaining ample reserves in the banking system.

Economic activity is expanding at a solid pace despite elevated uncertainty that owes, in part, to the conflict in the Middle East. Productivity growth and capital investment are strong. Job gains have kept pace with the workforce, and the unemployment rate has changed little.

Inflation remains elevated relative to the Committee’s 2 percent goal, in part reflecting supply shocks that have driven price increases in certain sectors, including energy. The Committee will deliver price stability.

(Read more from “Fed Leaves Interest Rates Unchanged” HERE)

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