Fed Leaves Rates Unchanged as It Assesses Iran War Inflation Risks

• The Federal Open Market Committee (FOMC) voted to hold its key interest rate steady at the range between 3.50%-3.75% as policymakers navigate their way through higher-than-expected inflation readings, mixed signs on the labour market, and a war.
• It projected higher inflation, steady unemployment and only a single reduction in borrowing costs this year as officials took stock ‌of economic risks from the U.S. and Israeli war with Iran. "In the near term, higher energy prices will push up overall inflation, but it is too soon to know the scope and duration of the potential effects on the economy," said Fed chief Powell.
• New projections showed the Fed's benchmark overnight interest rate would fall by just a quarter of a percentage point by the end of this year, with no hint of the timing. That view was unchanged from previous projections ​and remains out of step with Trump's demand for a sharp drop in borrowing costs.
• The new rate and economic projections showed the Fed, for now, largely looking through the oil shock, with policymakers still expecting to lower rates this year and anticipating inflation to be 2.2% by the end of 2027, near the central ​bank's 2% target. Notably, no policymakers saw ​rates needing to move higher ⁠by the end of this year, though one official anticipated a rate increase in 2027.
• Fed ​Governor Stephen Miran continued his string of dissents, voting against the decision to maintain the policy rate in favour of a rate cut.

(Source: Reuters)