Key facts
- The Federal Reserve held interest rates steady at a range of 3.5% to 3.75%.
- This marks a shift from the panel's divided vote in May.
- Inflation reached a three-year high of 4.2% year over year in May.
- The agreement to end the war with Iran is expected to reopen the Strait of Hormuz.
- Eight FOMC members indicated they see the central bank holding rates steady this year.
- Nine others anticipated rate hikes, and one suggested a single quarter-point cut.
The Federal Reserve held interest rates steady at a range of 3.5 percent to 3.75 percent during Chair Kevin Warsh's first rate-setting meeting. This decision marked a shift from the panel's divided vote in May. Warsh faces the challenge of balancing President Trump's desire for rate cuts with rising inflation, which reached a three-year high of 4.2 percent year over year in May, partly due to the war with Iran.
The agreement to end the war is expected to reopen the Strait of Hormuz, potentially leading to lower oil prices, which had climbed to over $100 per barrel. However, experts caution that gas prices may remain elevated for months. The stronger-than-expected May jobs report, combined with inflation concerns, has diminished expectations for interest rate cuts this year, with rate hikes now considered a possibility.
Economic projections released by the FOMC indicated that eight members anticipate holding rates steady, while nine expect rate hikes. Only one member suggested a quarter-point cut. In other news, retail sales increased by 0.9% in May, and Nvidia CEO Jensen Huang stressed the need for societal adaptation to AI. Senator Bill Cassidy criticized the Iran deal, and The Hill's Business & Economy newsletter noted the shift away from forward guidance under Warsh.